Gross margin: 70-85% is the standard
Classic SaaS runs 70-85% gross margin, with hosting, third-party APIs, support, and customer success counted as cost of revenue. Public SaaS companies cluster around 75-80%. That fat margin is the entire reason the SaaS model attracts investment: each additional customer costs very little to serve. If your gross margin is under 70%, investors will ask why, and you should have an answer that involves a plan, not a shrug.
The breakdown by type of business
AI-native products run 50-70% gross margin because inference costs scale with usage in a way traditional compute does not. VC-backed SaaS typically runs negative operating margins during growth, often minus 20% to minus 50% of revenue, and that is by design: the money goes into sales and product to buy compounding revenue. A solo-founder SaaS at small scale is a different animal, commonly keeping 80-90% of revenue as personal margin because there are no salaries, no sales team, and hosting for a small user base costs a few hundred dollars a month. None of these three profiles should benchmark against the others.
Rule of 40: the health check
The Rule of 40 says revenue growth rate plus operating margin should exceed 40. A company growing 60% while burning 20% of revenue passes; one growing 15% at breakeven does not. It exists because growth and profitability trade off against each other, and the rule prices that trade explicitly. It is a useful lens from roughly $1M ARR upward; below that, growth is nearly the only number that matters.
When these numbers lie
The most common distortion is misclassified costs: pushing support and customer success into operating expenses inflates gross margin by 5-10 points and is rampant in pitch decks. AI startups running on cloud credits show margins that evaporate when the credits do. Free-tier costs sit in cost of revenue while free users generate nothing, so a generous free tier can make a healthy paid product look low-margin. And a negative operating margin is only fine if unit economics are positive; burning money on customers who never pay back is not a growth strategy, it is a countdown.