Metrics & Performance
Gross Margin
Revenue minus cost of goods sold (COGS), expressed as a percentage — a critical indicator of business model quality and scalability.
Gross margin = (Revenue - Cost of Goods Sold) / Revenue × 100%. It measures how much revenue remains after accounting for direct costs of delivering the product/service. For SaaS companies, gross margins of 70-80%+ are typical (low COGS — primarily hosting and support). High gross margins are a fundamental requirement for VC-backable software businesses: they create the operating leverage needed to achieve profitability at scale. For marketplaces, gross margin is typically lower (20-40%) but take rates can partially compensate. Hardware companies face structural gross margin challenges (30-50%). Low gross margins (<40%) are a frequent reason for VC passes — the business won't generate enough margin to cover overhead and achieve profitability even at very large scale.