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RAC’s Private Software Growth Index: August 2026

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 August metrics by growth cohort:

OffRAC_PrivateGrowth_GROWTH_COHORTS_AUGUST2026

The August metrics by Rule of 40 cohort:

OffRAC_PrivateGrowth_RULEof40_AUGUST2026

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 August data:

  • Growth was higher in August compared to the same period last year in every category of our dataset. Median, top quartile, AND bottom quartile growth are all higher than they were in August 2025

  • Gross AND net retention are also higher in our dataset across the board compared to last year (median, top quartile, and bottom quartile)

  • Similarly, median, top quartile, and bottom quartile rule-of-40 have all risen compared to a year ago, and are trending up since last month

  • Burn has ticked up slightly in the slower-growing cohort, which we attribute to increased spending on product/R&D in search of growth (spending on S&M is largely unchanged)

  • To us, one of the most interesting aspects of the AI transition in tech is the widening dispersion in performance between top performing cohorts vs. all others. For example, the delta between the median and the top quartile rule-of-40 in our dataset has grown materially since December 2022 (the first month after ChatGPT was released). The best companies appear to be pulling further away from everyone else

  • In line with this pattern, the percentage of companies in our dataset that exceed “rule of 40” and “rule of 60” has also increased materially since December 2022. Our theory is that AI tooling is likely enhancing what works at great companies, but also amplifying any friction that exists in the less-successful ones, feeding a greater dispersion around the median

     

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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
09/24/2026
Category:
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