TLDR Tech / Founders
Rule of 40 Is Half Dead: Growth Is All That Matters, Margins Above 25% Don't Help, and Category Beats Both
Software M&A is seeing its second busiest year ever, largely due to SpaceX's $60 billion acquisition of Cursor. Kroll's data indicates that prioritizing growth over 20% yields higher revenue multiples (7.2x) compared to 10-20% growth (4.1x), while margin gains beyond 25% have minimal impact on valuation. Category positioning also significantly influences trading multiples, with engineering software and HCM showing different valuations despite similar Rule of 40 metrics.
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