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RAC’s Private Software Growth Index: September 2026

Written by Jim Toth | Oct 28, 2026, 1:19:58 PM

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 September metrics by growth cohort:

The September metrics by Rule of 40 cohort:


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 September data:

  • Growth continues to be stronger in our data set compared to the same period last year in every category. Top quartile, median, and bottom quartile growth are all higher compared to 1 year ago.

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

  • We find it interesting to track the differences between the faster- vs. slower-growing cohorts in our dataset. For example, businesses that are in the >35% growth cohort are spending only slightly more on sales & marketing compared to the slower-growing group; but they are spending significantly more on product/R&D. Product investment appears to be paying off and driving faster growth in this environment.

  • The upsell motion of faster-growing companies also appears to be far more effective compared to the slower-growing group, as observed in the delta between gross and net retention within both groups. Creating a better upsell motion may be an area of opportunity for companies that are growing more slowly today.

  • The difference in Rule of 40 among the faster- vs. slower-growing cohorts is also striking to us (+34% vs. -3%, respectively—a very big gap).

  • In fact, we have observed a longer-term trend that the delta between median and top-quartile performance is widening across a broad array of metrics—a trend we attribute to the implementation of AI tooling to “automate” what works best in great companies. We believe AI tooling may also be automating the friction that exists in slower-growing businesses as well, preventing the overall median from rising over time.

  • As another data point on “the best getting better”, there are more rule-of-40 and more rule-of-60 companies in our dataset today than there were in 2022 (when Chat GPT was first released). 

 

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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.
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