Before you treat 70% as a success story
SaaS Efficiency Score: ARR growth + FCF margin as a pre-written growth-vs-burn tripwire
A slide that prints “efficiency is 72%” without naming ARR year-over-year, how you computed free-cash-flow margin of ARR, or what you will do if the sum misses is not validation. Bessemer’s Efficiency Score asks a smaller, honester question: are we growing, and leaving enough cash on the table for that growth — against a bar you wrote first? Matching it is a decision signal. It is not a forecast that you will succeed, and not a substitute for naming the weakest demand, GTM, or retention assumption first.
Last updated: October 31, 2026
Direct answer
What is the SaaS Efficiency Score — and why write the tripwire first?
Efficiency Score = ARR year-over-year growth rate + free-cash-flow (FCF) margin of ARR. It answers whether you are growing and leaving enough cash for that growth — not whether you will succeed. Write the tripwire before you look: “for this ARR band / as-of date, Efficiency Score must stay ≥X (or we stop scaling S&M, cut burn, and fix CAC payback or churn first).” Hitting or missing it is a decision signal, not a prediction of success.
Key takeaways
What to remember
- Bessemer’s formula, from Scaling to $100 Million (21 September 2021): Efficiency score = FCF margin of ARR + ARR YoY Growth Rate. Show both additive inputs, not only the sum. Write how you compute FCF and which ARR base you use before the first report.
- Scaling says the sitting is generally only applicable after $25MM+ of ARR — before that, revenue bases are too small for it to be meaningful. 10 Laws of Cloud, Law 2 (19 June 2019): for growth-stage startups earning less than $30 million ARR, efficient growth is net new ARR over net burn, with an optimal score >1.5. Below about $25–30MM ARR, prefer that ratio (and burn multiple / CAC payback) over forcing an Efficiency Score narrative.
- Portfolio targets Bessemer encourages in Scaling: 70% efficiency scores between $25–50MM of ARR; slightly lower 50% at $100MM+ as YoY growth drops and companies balance profitability versus grow-at-all-costs. Do not treat either number as proof you will succeed.
- Two source-tagged EMCLOUD averages — do not flatten them into one “true” number. Scaling: the Rule of 40 is often referenced as 40%+, while the BVP Nasdaq Emerging Cloud Index average Efficiency Score is closer to 50%, anchored by Zoom, Shopify, Datadog, Crowdstrike, and other high performers. 10 Laws: across ^EMCLOUD, the average efficiency score is approximately 45%. Cite each sitting as that page wrote it.
- Write the tripwire before you measure: as-of date + ARR band + definitions (ARR YoY %; FCF margin of ARR) + threshold (early: net new ARR / net burn >1.5; later: 70% / 50% / ≥40% playbook floor — pick one and justify) + named action (do not scale S&M / cut burn until CAC payback and churn improve / keep experimenting on demand / raise to accelerate only if the score holds). A Yibud score is not an Efficiency Score and not a success prediction.
Why it matters
Why a growth slide can still hide a cash problem
Founders treat “we are growing fast” as the whole story. Growth without the cash it left behind is a headline, not a decision. Two Bessemer sittings are useful here as instruments, not as personal odds: Scaling on the named additive score and stage targets, and 10 Laws on the early ratio plus the Public Playbook floor.
The score is growth and cash, written as one number
Bessemer’s Efficiency Score adds ARR year-over-year to FCF margin of ARR. That is why a 80% growth story with a deeply negative FCF margin can still print a middling sum — and why a low-growth, cash-rich year can print a “fine” score while net new ARR is tiny. The two inputs are the sitting. The sum is the compression.
The sitting is not for a $2MM ARR spreadsheet
Scaling is explicit: the score is generally only meaningful after $25MM+ of ARR. 10 Laws defines efficient growth below $30 million ARR as net new ARR / net burn, optimal >1.5. Forcing a 70% Efficiency Score narrative onto a seed book is how you starve discovery and call it discipline.
Two EMCLOUD averages, two dates — not one reconciled “truth”
Scaling (21 September 2021) says the BVP Nasdaq Emerging Cloud Index average Efficiency Score is closer to 50%. 10 Laws (19 June 2019) says the ^EMCLOUD average is approximately 45%. Those are two published sittings, years apart. This page does not invent a single true average between them.
The five terms
The formula, Rule of 40, burn multiple, the early ratio, and the tripwire
These five fields are the instrument. If any one is fuzzy, the number is a slide, not a tripwire. This page does not publish a grade table beyond Bessemer’s named formula, the $25MM+ caveat, the 70% / 50% stage targets, the two source-tagged EMCLOUD averages, the early >1.5 ratio, and the Public Playbook ≥40% floor.
The formula — FCF margin of ARR + ARR YoY
Bessemer, Scaling to $100 Million: Efficiency score = FCF margin of ARR + ARR YoY Growth Rate. ARR YoY is this year’s ARR versus last year’s ARR, as a percent. FCF margin of ARR is free cash flow divided by the ARR base you named. Write both definitions before the first report. Do not swap GAAP revenue growth for ARR YoY after the close. Do not swap EBITDA margin for FCF without saying so.
Versus Rule of 40 — same family, different profit line
Rule of 40 is commonly growth% + profit margin% ≥40%. Bessemer’s Efficiency Score specifically uses FCF margin of ARR + ARR YoY. Scaling notes the Rule of 40 is often referenced as 40%+ while the BVP Nasdaq Emerging Cloud Index average Efficiency Score is actually closer to 50%. 10 Laws’ own EMCLOUD average is approximately 45%. Do not rewrite the Rule of 40 page here. One instrument per sitting.
Versus burn multiple — additive score, not a cash÷growth multiple
Burn multiple is Net Burn ÷ Net New ARR in a period. Efficiency Score adds growth% and FCF%. A company can look fine on one and ugly on the other: high ARR YoY with deeply negative FCF can still “pass” a naive growth-plus-profit slide, while the same period’s burn multiple is terrible. Keep the instruments on separate pages.
Early efficient growth — net new ARR / net burn, optimal >1.5
10 Laws, Law 2: for growth-stage startups earning less than $30 million ARR, efficient growth is defined by net new ARR over net burn, with an optimal score >1.5. Longer term, the same law says maximize efficiency scores = ARR growth + FCF margin of ARR. Below about $25–30MM ARR, prefer that early ratio — and burn multiple / CAC payback — over forcing the additive score.
The tripwire — written before you look
As-of date + ARR band + definition (ARR YoY %; FCF margin of ARR — how you compute FCF and which ARR base) + threshold (early >1.5; later 70% / 50% / ≥40% playbook floor — pick one and justify) + named action (do not scale S&M / cut burn until CAC payback and churn improve / keep experimenting on demand / raise to accelerate only if the score holds). A kinder bar after the results is a recap, not a tripwire. Matching the bar is a decision aid. It does not prove you will succeed.
Worked example
Two slides you can copy (illustrative — fictional)
The dollars below are illustrative. Names, product, and every figure in this section are invented so you can see a high-growth / deeply negative FCF sitting next to a low-growth / strong-FCF sitting. This is not a study, not an industry benchmark, and not a Yibud report. Copy the method, not the numbers.
The promise, written before the year closes
Illustrative names: founder Priya Shah at Ledgerpath, invoicing software for boutique studios. Recurring ARR exists. The tempting trophy is a board slide that prints “we beat 40” after swapping EBITDA for FCF, or a second slide that prints a 50% Efficiency Score from low growth plus fat FCF while the period burn multiple is ugly. The tripwire is written first, on 3 January: if trailing ARR is still below $25MM, honor net new ARR / net burn >1.5 and do not scale S&M on a miss; if trailing ARR has crossed $25MM, honor Efficiency Score (ARR YoY + FCF margin of ARR) ≥70% before we 3× paid — Yibud’s suggested template from Scaling’s $25–50MM 70% target and 10 Laws’ early >1.5 ratio, not a homemade letter grade, and not permission to treat 70% as success.
Slide A — 80% ARR YoY, −50% FCF margin, Efficiency Score 30%
Invented inputs: trailing ARR $8.0MM a year ago, $14.4MM now → ARR YoY = 80%. FCF = −$7.2MM. FCF margin of ARR = −7.2 / 14.4 = −50%. Efficiency Score = 80% + (−50%) = 30%. Both inputs sit on the dated page, not only the 30%. A naive Rule of 40 that swapped in +10% EBITDA margin would have printed 90% and called it a pass. Same company. Different profit line. Different decision. 30% misses the ≥70% bar they wrote for a $25–50MM sitting — and at $14.4MM they are still below Scaling’s $25MM+ meaningfulness line, so this additive score is the wrong first instrument anyway.
Slide B — 8% ARR YoY, +42% FCF, Efficiency Score 50%
Invented inputs, same fictional company a later year, still labeled illustrative: ARR $20.0MM a year ago, $21.6MM now → ARR YoY = 8%. FCF = +$9.07MM. FCF margin of ARR ≈ 42%. Efficiency Score = 8% + 42% = 50%. The sum matches Scaling’s $100MM+ 50% language if someone pastes that target down a stage. Same year, different window — invented Q4 only: Net Burn $1.8MM, Net New ARR $0.4MM → burn multiple = 4.5x. The annual additive score looks “fine.” That quarter’s burn multiple is ugly. One sentence does not settle both sittings.
What the tripwire does — and what must not happen
Slide A at $14.4MM ARR: do not scale S&M on a 30% Efficiency Score, and do not use the additive score as if $14.4MM were already $25MM+. Honor the early ratio they wrote: invented net new ARR $6.4MM / invented net burn $8.0MM = 0.8, below >1.5. Slide B: 50% is not permission to ignore a 4.5x quarterly burn multiple, and not proof the company will IPO. Do not swap EBITDA in after the close so Slide A prints 90. Do not update Shopify’s dated snapshot onto this fictional book. Do not annualize one fat month of ARR growth and call it YoY.
Write the tripwire before the first report. Show both additive inputs. If the period closes and you missed the bar you wrote — or only “cleared” it after swapping EBITDA for FCF — honor the action. If both inputs and the early-or-later gate cleared the bar, continue to the next cheapest test. Neither 30% nor 50% nor a Yibud score predicts success.
Published gates
Stage targets — source-tagged, not a grade table
The rows below are what Scaling and 10 Laws actually named. They are not a Yibud letter-grade chart, not a personal-odds table, and not a reconciled EMCLOUD average. Use them as vocabulary, then write your own tripwire for the ARR band you can actually measure.
| Stage / sitting | What they named | Source tag |
|---|---|---|
| Early, less than $30MM ARR | Efficient growth = net new ARR / net burn; optimal >1.5 | 10 Laws of Cloud, Law 2 (19 June 2019) |
| $25–50MM ARR | Bessemer encourages 70% efficiency scores | Scaling to $100 Million (21 September 2021) |
| $100MM+ ARR | Slightly lower 50%, as YoY growth drops and companies balance profitability vs grow-at-all-costs | Scaling to $100 Million (21 September 2021) |
| BVP Nasdaq Emerging Cloud Index / ^EMCLOUD average | Closer to 50% (Scaling). Approximately 45% (10 Laws). Two sittings; do not invent one “true” average. | Scaling 2021-09-21; 10 Laws 2019-06-19 |
| Public Playbook — IPO optionality | Target $100 million+ in ARR and 40% efficiency score; businesses crossing $100MM+ ARR, growing over 40% at cash-flow breakeven (or clear line of sight within about a year of IPO) generally allow a successful IPO and have efficiency scores greater than 40% | 10 Laws, Public Playbook bonus (19 June 2019) — Bessemer’s framing, not a guarantee you will IPO |
Scaling also says the additive score is generally only applicable after $25MM+ of ARR. This page does not reproduce Scaling’s full ARR-growth, NRR, gross-margin, or opex band tables — those sittings live on their own Yibud pages. Do not invent KeyBanc / ChartMogul / Iconiq Efficiency Score tables here.
A dated snapshot
Shopify in Scaling — close to 70%, their numbers, their date
Scaling’s historical snapshot, used as written: even at over $3.8 billion LTM revenue, Shopify was still growing ~60% year-over-year with ~10% FCF margins, for an efficiency score close to 70%. That is Bessemer’s illustration inside the 21 September 2021 piece. This page does not invent today’s Shopify market cap, does not refresh the growth or FCF figures, and does not treat “close to 70%” as a law you must print this quarter.
Snowflake in the same piece — a cash-for-growth illustration, not a score they computed
Same Scaling lesson, still their illustration: Snowflake burned over $100MM but grew revenue by almost $170MM and over 170% year-over-year. Bessemer uses that as a picture of trading cash for growth. This page does not compute an Efficiency Score for Snowflake, and does not update those dated dollars.
Public Playbook
≥40% as IPO optionality — Bessemer’s framing, not a promise
10 Laws’ Public Playbook bonus, used as written: crossing $100MM+ ARR, growing over 40% at cash-flow breakeven (or with a clear line of sight within about a year of IPO) generally allows a successful IPO; those businesses have efficiency scores greater than 40%. The same bonus names the target as $100 million+ in ARR and a 40% efficiency score for IPO optionality. Present that as Bessemer’s playbook framing. It is not a guarantee you will IPO, and not proof that ≥40% means the startup will succeed.
How to run it
How to run an Efficiency Score tripwire without faking scale
This is Yibud’s suggested sequence, not a Bessemer checklist and not an audit. Honor the tripwire you wrote before the first period report. If you cannot name the decision the number would change, you are building a slide.
- 1
Write the tripwire before you look
Name the as-of date, the ARR band, ARR YoY, how you compute FCF, which ARR base sits in the FCF margin, the threshold, and the action. Early (under about $25–30MM ARR): net new ARR / net burn >1.5. Later: pick 70% ($25–50MM, Scaling), 50% ($100MM+, Scaling), or the ≥40% Public Playbook floor — and write why. Do not rewrite the bar after the report.
- 2
Lock the two additive inputs
ARR YoY is this year’s ARR versus last year’s ARR. FCF margin of ARR uses the FCF definition and the ARR base you wrote. If you only have three months of ARR, say so — do not multiply a monthly change by twelve and call it year-over-year. Mixing GAAP revenue growth into an ARR YoY sitting after the close is how 30% becomes a kinder 55%.
- 3
Compute both inputs. Put them on the dated page next to the sum.
Add FCF margin of ARR to ARR YoY. Do not publish 50% and hide a −40% FCF line behind “growth is 90%.” The inputs are the sitting; the percent is the compression. Optional neighbors — burn multiple, CAC payback, Magic Number, gross margin, NRR — stay on their own pages. Do not average them into a homemade “efficiency index.”
- 4
Read the early ratio when you are below ~$25–30MM ARR
Scaling: the additive score is generally only meaningful after $25MM+ ARR. 10 Laws: below $30 million ARR, efficient growth is net new ARR / net burn, optimal >1.5. If you are still in that band, run that ratio (and burn multiple / CAC payback). Do not force a 70% Efficiency Score story onto a discovery quarter.
- 5
Honor the action. If you are pre-revenue, use a different instrument.
If the period closes and you missed the bar you wrote, do the thing you named — stop scaling S&M, cut burn, fix CAC payback or churn, or keep experimenting on demand. Do not swap EBITDA for FCF so the sum clears 40. Pre-revenue or tiny ARR: use smoke tests, willingness-to-pay, interviews, or kill criteria first. A Yibud score is not an Efficiency Score.
What you leave with
The Efficiency Score tripwire (copy this)
If the sitting produced a percent and no dated action, you did not finish. Fill the brackets. Leave nothing as “efficiency is fine,” “soon,” or “we’ll know it when the round happens.”
The fill-in contract
Product: [name]. As-of date: [day], written before the first report. ARR band: [still under ~$25–30MM / $25–50MM / $100MM+ / other]. Hypothesis this number can falsify: [we can grow ARR and still leave enough cash / we can scale S&M without the growth-vs-cash sum collapsing]. ARR last year: [ ]. ARR this year: [ ]. ARR YoY: [ ]. FCF definition: [how computed]. ARR base for the margin: [same trailing ARR / other — say which]. FCF: [ ]. FCF margin of ARR: [ ]. Efficiency Score: [ARR YoY + FCF margin]. Early ratio if still under ~$30MM ARR: net new ARR [ ] / net burn [ ] = [ ] (honor >1.5). Threshold: [e.g. early >1.5; or ≥70% in the $25–50MM band; or ≥50% at $100MM+; or ≥40% Public Playbook floor — pick one and justify from Scaling / 10 Laws, not a homemade letter grade]. Action if miss: [do not scale S&M / cut burn until CAC payback and churn improve / keep experimenting on demand / do not raise a growth-at-all-costs round]. Action if hold: [raise to accelerate only if the score holds]. Compare the next period on the same definitions. A Yibud score does not fire this line.
The 70% / 50% / ≥40% / >1.5 lines are Yibud’s suggested template from Scaling and 10 Laws — not a census, not permission to skip the two inputs, and not permission to treat a pass as success. Rewrite the threshold before you measure if you have a reason. Do not rewrite it after.
Example tripwire (Yibud’s suggested template, not a law)
If trailing ARR is still below $25MM on 31 December and net new ARR / net burn is not >1.5 → we do not 3× paid acquisition; we fix burn and the weakest demand or payback assumption first. If trailing ARR is in the $25–50MM band and Efficiency Score (ARR YoY + FCF margin of ARR) is below 70% → same action. Do not swap EBITDA for FCF after the close. Do not mix GAAP revenue growth into ARR YoY. Report both additive inputs next to the sum.
A 70% score on one year is still one year. A Yibud report score does not fire this tripwire. If you have no meaningful ARR yet, this template is the wrong first instrument — use a smoke test, willingness to pay, or interviews instead.
The fork
When to use an Efficiency Score tripwire — and when not to
The additive Efficiency Score is the wrong first instrument when ARR is still tiny, when you are still testing demand, or when you have not named FCF. It is the right instrument when trailing ARR is large enough for Bessemer’s sitting, both inputs can be named, and you are deciding whether growth is leaving enough cash before you scale S&M.
Use it when you have meaningful ARR, named FCF, and a scale-or-cut decision
Trailing ARR is in a band where Scaling’s additive score is the vocabulary you meant to use — generally after $25MM+. You can name ARR YoY and FCF margin of ARR. You are about to 3× a channel, tell yourself “we beat 40 so we are fine,” or skip the FCF line because growth looks good. That is when a dated sum plus both inputs earns its keep. Below ~$25–30MM ARR, use the early net-new-ARR / net-burn >1.5 ratio instead. Optional: run Rule of 40, burn multiple, CCS, Magic Number, CAC payback, or gross margin as separate sittings — do not average them into a homemade index.
Do not start here when you are pre-revenue, still discovering, or forcing the score below $25MM ARR
No paying customers yet? There is no honest ARR YoY or FCF margin of ARR. Do not invent a forecast numerator. Still writing a deposit, a smoke test, or a first interview batch? Those pages come first. Still writing Stop / Pivot / Continue? Those are the decision contracts. This page supplies one growth-vs-cash instrument those contracts can later read. It does not replace them. A Yibud score is not an Efficiency Score.
Not the same page
Efficiency Score vs Rule of 40, burn multiple, CCS, Magic Number, payback, LTV:CAC, gross margin, retention, vanity metrics, discovery, and decision contracts
Several Yibud pages sit next to this one. Mixing them up turns a growth-plus-EBITDA sum, a burn÷ARR multiple, a cumulative capital multiple, a sales-efficiency ratio, or a waitlist into “Efficiency Score is 70%, so scale.”
Rule of 40 — growth% + profit%, not this named FCF+ARR-YoY score
That page asks whether revenue growth rate plus profit margin (often EBITDA) cleared a ≥40 bar. This page owns Bessemer’s named Efficiency Score: FCF margin of ARR + ARR YoY, plus the 70% / 50% stage targets and the two EMCLOUD averages. A 42 Rule of 40 does not tell you FCF margin of ARR. A 70% Efficiency Score does not tell you growth plus EBITDA is healthy.
SaaS Rule of 40 →Burn multiple — Net Burn ÷ Net New ARR, not this additive score
That page asks how much company cash you burned per dollar of net new ARR. This page adds growth% and FCF%. A 2x burn multiple does not tell you Efficiency Score. A 50% Efficiency Score does not tell you the period multiple is healthy. One company can look fine on one and ugly on the other.
Burn multiple for startups →Cash Conversion Score — cumulative ARR ÷ net capital consumed
That page is a stock: current ARR divided by equity + debt raised minus cash. This page is a flow sitting: this year’s ARR growth plus this year’s FCF margin of ARR. A 1.0x CCS does not tell you Efficiency Score. A 70% Efficiency Score does not tell you how much capital the book consumed.
Cash Conversion Score for startups →SaaS Magic Number — S&M → incremental revenue, not growth+FCF
That page asks how efficiently prior-period sales and marketing spend turned into incremental subscription revenue. This page is ARR YoY plus FCF margin of ARR. A 1.2 Magic Number does not tell you Efficiency Score. A 50% Efficiency Score does not tell you last quarter’s S&M paid for itself.
SaaS Magic Number →CAC payback — months to recover CAC, not this sum
That page asks how many months of contribution recover fully-loaded CAC. This page is company-level growth plus FCF. A 7-month payback does not tell you Efficiency Score. A 70% Efficiency Score does not tell you LinkedIn ads pay back.
CAC payback for startups →LTV:CAC — lifetime value ÷ CAC, not this score
That page asks whether a cohort’s lifetime contribution cleared a multiple of CAC. This page is ARR YoY + FCF margin of ARR. A 3.2 LTV:CAC does not tell you Efficiency Score. Unit economics are how you raise the score honestly — they are not the score.
LTV:CAC for startups →Gross margin — delivery-cost ceiling, not the growth+FCF sum
That page asks what share of each revenue dollar survives COGS. Gross margin shapes how much FCF is even possible. It is not ARR YoY + FCF margin. A 70% gross margin does not tell you Efficiency Score is 70%.
SaaS Gross Margin →NRR and logo churn — retention endurance, not this score
Those pages ask whether a starting cohort paid you more or less, and how many logos left. Retention is how growth endurance stays honest. It is not FCF margin of ARR + ARR YoY.
Vanity metrics — hygiene class, not this tripwire
That page is the sorting hat: hits, cumulative signups, and waitlist size feel like progress and do not tell you what to do next. A pretty Efficiency Score chart with EBITDA swapped in and no tripwire can still be vanity.
Vanity metrics for startups →Smoke, WTP, interviews, Ellis — demand instruments, not this score
Those pages test reach, first money, coverage of needs, or stated disappointment. Pre-revenue and tiny-ARR teams should start there. Do not “optimize Efficiency Score” by starving discovery.
Kill and pivot — contracts that can read this number
Those pages write Stop or rewrite one dimension. This page can supply the growth-vs-cash instrument those contracts later read: a dated Efficiency Score, or the early net-new-ARR / net-burn ratio, against a bar you wrote first. A 72% slide with no FCF line cannot fire a kill line honestly.
Where Yibud fits
Neither Efficiency Score nor a Yibud score predicts success
Yibud is a free, no-signup startup idea validator. Scores come from a deterministic rule engine, not from a language model guessing success. Optional AI text, when it is used, only polishes prose. It does not invent the number. A Startup MRI report can name a weak monetization, distribution, or retention assumption, then a Day-7 Continue / Refine / Re-test / Stop signal. The score is a flashlight on the weakest assumption to test next — not Bessemer’s Efficiency Score, not Rule of 40, not burn multiple, not a forecast. Efficiency Score work sits next to that assumption: write the tripwire, do not hope a 70% slide means growth left enough cash. If you already have a report, start with the named assumption, not the overall score. Then run the period yourself. The method on this page stands alone if you never open the analyzer.
Analyze my idea →Common mistakes
What usually wastes an Efficiency Score week
Using Efficiency Score before $25MM ARR as if it were meaningful
Scaling: the sitting is generally only applicable after $25MM+ of ARR. Below that — and below $30 million ARR in 10 Laws — prefer net new ARR / net burn >1.5, plus burn multiple and CAC payback. Forcing a 70% story onto a seed book starves discovery.
Mixing GAAP revenue growth with ARR YoY
The formula uses ARR year-over-year growth rate. GAAP revenue growth is a different basis. Write which one you meant before the first report. Switching after the close is how a miss becomes a slogan.
Swapping EBITDA margin for FCF without saying so
Efficiency Score uses FCF margin of ARR. Rule of 40 often uses EBITDA or another profit line. If you compute the named score on EBITDA, you are no longer running Bessemer’s instrument. State the profit definition on the dated page. Keep it.
Treating ≥40% or 70% as proof of success
Scaling’s 70% / 50% targets and 10 Laws’ ≥40% Public Playbook floor are gates Bessemer named. Clearing the bar you wrote means that period cleared a gate — not that the startup will succeed or IPO. Neither Efficiency Score nor a Yibud report score predicts success.
Updating Shopify or Snowflake beyond Bessemer’s dated snapshots
Scaling’s Shopify vignette is over $3.8 billion LTM revenue, ~60% YoY, ~10% FCF, efficiency score close to 70% — a 21 September 2021 snapshot. Snowflake burned over $100MM, grew revenue almost $170MM, over 170% YoY — an illustration of trading cash for growth, not a score this page computes. Do not refresh those figures from today’s market.
Annualizing monthly growth and calling it ARR YoY
One fat month × 12 is not year-over-year ARR growth. If you only have a short window, report the short window and say so. The tripwire names the period first.
Sources
Where these ideas come from
- Mary D’Onofrio, Ethan Ding & Atlas Editors / Bessemer Venture Partners, “Scaling to $100 Million,” 21 September 2021 — Used for the formula (FCF margin of ARR + ARR YoY Growth Rate); meaningful mainly after $25MM+ ARR; portfolio targets of 70% between $25–50MM ARR and 50% at $100MM+; Rule of 40 often referenced as 40%+ while the BVP Nasdaq Emerging Cloud Index average Efficiency Score is closer to 50%, anchored by Zoom, Shopify, Datadog, Crowdstrike, and other high performers; the Shopify snapshot (over $3.8 billion LTM revenue, ~60% YoY, ~10% FCF, efficiency score close to 70%); and the Snowflake cash-for-growth illustration (burned over $100MM, grew revenue almost $170MM, over 170% YoY) — not an Efficiency Score computed on this page. Do not invent extra grade tables or update those dated snapshots.
- Byron Deeter, Elliott Robinson & Mary D’Onofrio / Bessemer Venture Partners, “Roadmap: 10 laws of cloud,” 19 June 2019 — Used for Law 2 only: early (<$30MM ARR) efficient growth = net new ARR / net burn, optimal >1.5; longer term, maximize efficiency scores = ARR growth + FCF margin of ARR; ^EMCLOUD average efficiency score approximately 45%; and the Public Playbook bonus (crossing $100MM+ ARR, growing over 40% at cash-flow breakeven or clear line of sight within about a year of IPO, generally allows a successful IPO; those businesses have efficiency scores greater than 40%; target $100 million+ in ARR and 40% efficiency score for IPO optionality). Present as Bessemer’s playbook framing, not a guarantee you will IPO.
In one paragraph
Summary you can quote
Bessemer’s Efficiency Score = ARR year-over-year growth rate + FCF margin of ARR. It asks whether you are growing and leaving enough cash for that growth. Scaling (21 September 2021): generally meaningful after $25MM+ ARR; encourages 70% between $25–50MM ARR and 50% at $100MM+; EMCLOUD average closer to 50%; Shopify snapshot ~60% YoY + ~10% FCF → close to 70%. 10 Laws (19 June 2019): below $30MM ARR, efficient growth = net new ARR / net burn, optimal >1.5; EMCLOUD average approximately 45%; Public Playbook target $100 million+ ARR and 40% efficiency score for IPO optionality — framing, not a guarantee. Write the tripwire before you look. Show both additive inputs. Matching the gate is a decision signal. Neither Efficiency Score nor a Yibud score predicts success.
FAQ
Questions founders actually ask
What is the SaaS Efficiency Score?
Bessemer’s formula: FCF margin of ARR + ARR year-over-year growth rate. It asks whether you are growing and leaving enough cash for that growth. It is a growth-vs-cash tripwire, not a success score, not Rule of 40, and not burn multiple. Write the bar before you measure.
What is a good Efficiency Score?
This page does not publish a universal “good” grade table beyond the sources. Scaling: 70% between $25–50MM ARR; 50% at $100MM+; EMCLOUD average closer to 50%. 10 Laws: EMCLOUD average approximately 45%; early (<$30MM ARR) net new ARR / net burn >1.5; Public Playbook ≥40% with $100 million+ ARR as IPO optionality — framing, not a guarantee. Write your own tripwire. Do not invent a single reconciled EMCLOUD average.
How is Efficiency Score different from Rule of 40 and burn multiple?
Rule of 40 is commonly growth% + profit margin% ≥40% (often EBITDA). Efficiency Score specifically uses FCF margin of ARR + ARR YoY. Burn multiple is Net Burn ÷ Net New ARR — a cash-to-growth multiple, not an additive percent. A company can look fine on one and ugly on another. Use this page for the named Bessemer score; use those pages for those instruments.
Should an early-stage startup use Efficiency Score?
Usually not as the first instrument. Scaling: generally only applicable after $25MM+ ARR. 10 Laws: below $30 million ARR, efficient growth is net new ARR / net burn, optimal >1.5. Pre-revenue and tiny ARR teams should use smoke tests, willingness-to-pay, interviews, or kill criteria first. Do not starve discovery to decorate a score.
Is a Yibud score the same as Efficiency Score? Does it predict success?
No and no. Yibud scores come from a deterministic rule engine on your idea inputs. They point at the weakest assumption to test next. They are not Bessemer’s Efficiency Score, not Rule of 40, not burn multiple, and not a forecast. Neither an Efficiency Score pass nor a Yibud report score predicts success. You do not need an account to use this page.
Write the growth-vs-cash tripwire before you scale S&M
Yibud scores weak assumptions with a deterministic engine. You write as-of date, ARR band, both additive inputs, threshold, and action while you are still honest — then a year’s Efficiency Score is a tripwire, not a 72% slide.
Generate a Yibud report →