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RAC’s Private Software Growth Index: April 2026

Reliable data about private growth-stage software companies is extremely hard to find. In our experience, what’s available is typically self-reported (therefore noisy), and often lags by 2 quarters or more. Data on public software companies is more easily accessible, but is generally of limited utility for growth-stage companies and also lags by several months.

We believe that quality data is essential to helping software companies scale, which is why we make our own internal consolidated metrics available to founders each month. These numbers are aggregated from hundreds of private software companies that RAC reviews across our funds, using only primary sources, validated by our investment team. We exclude companies that are below $2.5 million of ARR.

The April metrics by growth cohort:

April metrics by growth

The April metrics by Rule of 40 cohort:

April metrics by rule of 40

To learn more about the Private Software Growth Index and how it was constructed, please see the disclosure at the bottom of this post.

Our observations on the April data:

  • Unlike in the past, companies in the faster-growing cohort (30%+ ARR growth) today are not spending meaningfully more as a group on sales and marketing compared to slower-growing companies.

  • However, faster growing companies are spending more on product and R&D compared to the slower-growing cohort, resulting in higher burn.

  • Higher product/R&D spending is strongly correlated with (materially) higher retention and better sales efficiency metrics, leading to a better overall Rule of 40 in the high-growth cohort.

  • Achieving “Rule of 40” is still extremely difficult for growth-stage software businesses. Only 22% of our dataset exceeds that hurdle--and there is upward bias in our universe of companies.

  • It’s notable that today’s Rule of 40 companies as a group are showing incredibly low payback periods—below 15 months, which is very hard to achieve in enterprise software and is a signal of strong demand pull.

  • The data is also a useful reminder that if your goal is to exceed Rule of 40, having a strong ‘growth’ side of the equation makes the job much, much easier. In growth stage software, the reality is that it’s hard to ‘cut’ your way to Rule of 40.

Interested in receiving the data straight to your inbox each month?

Subscribe to our ‘Off The RAC’ newsletter for RAC’s monthly Private Software Growth Index, along with highlights across RAC and our portfolio companies.

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*disclosures
The Private Software Growth Index is calculated by RAC, from information compiled from third party resources. There can be no assurance that the underlying data provided to RAC is accurate. The Private Software Growth Index is calculated only from a subset of private B2B software companies in the $2.5-20M ARR range, and therefore may not be representative of all companies of this type and size.

None of this information or metrics shown or other product or service constitutes an offer to buy or sell, or a promotion or recommendation of, any security, financial instrument or product or trading strategy. Further, none of the information or metrics is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

The information is provided "as is" and the user of the Information assumes the entire risk of any use. RIVERSIDE, RIVERSIDE ACCELERATION CAPITAL AND THEIR AFFILIATES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall Riverside, Riverside Acceleration Capital and their affiliates be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the information even if advised of the possibility of such damages.
Jim Toth
Jim Toth
Managing Partner
05/27/2026
Category:
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