Growth Metrics

Year-over-Year Growth (YoY)

The percentage change in a metric compared to the same period in the prior year, eliminating seasonal distortions.

YoY growth is the standard benchmark for mature performance evaluation because it controls for seasonality by comparing equivalent periods. A December revenue figure compared to the prior December removes the effect of holiday spending patterns. For venture-backed SaaS companies, tripling ARR year-over-year has been a traditional benchmark for top-tier performance. YoY growth decelerates naturally as a company scales — going from $1M to $3M ARR is far easier than from $100M to $300M. This deceleration is expected and healthy, but the rate of deceleration is closely watched. Investors use YoY growth in conjunction with efficiency metrics (burn multiple, Rule of 40) to evaluate whether a business is growing sustainably or burning unsustainable resources to produce the growth.