Alp SuleimanGrowth Partner

Benchmarks

What is a good gross margin?

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Short answer

Gross margin is the share of revenue left after the cost of delivery. In Bessemer's cloud portfolio (2010–1H21) the average gross margin is 65–70% regardless of maturity. In BVP's sample of 20 AI startups (2025) the average is 60% for Shooting Stars and about 25% for Supernovas. These are separate samples and neither is random; read the segments separately.

Ranges by segment

SegmentRangeContext
Cloud / SaaS average65–70%1Bessemer's cloud portfolio, 2010–1H21. Average regardless of maturity; the middle 50% of companies sit at roughly 60–80%. The portfolio is not a random sample.
Median by ARR band (cloud)$1–10M: 72% · $10–25M: 70% · $25–50M: 65% · $50–100M: 70% · $100M+: 70%1Same portfolio, median values.
Top performers (cloud)$1–10M: 85%+ · $10–25M: 80% · $25–50M: 75%+ · $50–100M: 80%+ · $100M+: 80%+1Levels Bessemer gives for its top-performing cloud companies by ARR band.
Strong company, low marginTwilio: ~50%1Bessemer: for much of its time in the portfolio since the 2009 seed round, Twilio's margin was ~50%, because payments to telecom providers sit in COGS.
AI: Shooting StarsAverage 60%2BVP, State of AI 2025 (August 13, 2025): 20 high-growth AI startups from its portfolio and beyond. BVP describes their margins qualitatively as slightly lower than SaaS peers and gives no separate SaaS figure.
AI: Supernovas~25% (often negative)2Same sample. BVP writes that these companies often trade profit for distribution in the short term.
Companies building AI products, executive survey (ICONIQ; margin scope not defined in the source)2025: 45% · 2026: 53% (projected) · 2027: 59% (projected)3ICONIQ, July 2026: survey of 300+ executives at software companies building AI products, self-reported. The figure is given in the context of AI products; the text has no breakdown by segment or revenue band. The 2025 value comes from the Q4 2025 wave; 2026 and 2027 are projections from the Q2 2026 survey. The page text does not define which revenue line or segment the margin covers.

Reminder: These ranges are reference points, not targets. Your segment, contract structure and stage change the number.

Gross margin

How to read it

  • The three sources in the table are three different samples: Bessemer's cloud portfolio (2010–1H21), BVP's 20 AI startups (2025) and ICONIQ's survey of 300+ executives (2026, self-reported). The figures do not stack. Compare your own number only with a row from the same segment (our inference).
  • Bessemer calls gross margin perhaps the only operating or cost metric in cloud with very little wiggle room: delivery cost should be low, so investors expect a tight band. COGS typically holds hosting, implementation and services costs. Bessemer adds that some of the strongest companies in its portfolio sat below that band.
  • On AI, BVP writes that Shooting Stars look more like stellar SaaS companies, but with margins slightly lower than SaaS peers because of faster growth and modest model-related costs. Supernovas average ~25%, often negative. BVP calls these new benchmarks admittedly freakish, shared to showcase standout startups of the moment, and names Shooting Stars as the more important benchmark for AI founders. Both rest on 20 selected companies and do not represent a typical AI company (our inference).
  • In ICONIQ's text the margin rise is the result of an executive survey, and the 2026 and 2027 values are projections, not measurements. That three sources give three different numbers says this (our inference): there is no single good margin for AI. Say which segment, which sample and which year you are talking about first.

What moves this metric

  • 01

    What you count in COGS

    According to Bessemer, typical COGS items for cloud companies are hosting, software implementation and services costs. Before comparing your margin with anyone else's, make sure you count those items the same way.

  • 02

    The structure of delivery cost

    According to Bessemer, Twilio ran at ~50% because payments to telecom providers sat in COGS. For AI products, BVP puts Shooting Stars slightly below SaaS peers because of modest model-related costs.

  • 03

    Giving up margin for distribution

    BVP links the ~25% average margin of Supernovas to trading profit for distribution in the short term. Writing it down as a deliberate trade separates it from an unmeasured leak (our inference).

  • 04

    CAC payback and LTV

    Bessemer measures CAC payback against gross-margin-adjusted ARR and defines customer lifetime value as the gross-margin-affected value of a customer. If margin falls, both get worse (our inference).

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Frequently asked

What gross margin should a SaaS company have?

In Bessemer's cloud portfolio the average is 65–70%, with the middle 50% of companies at roughly 60–80%. Top performers sit at 75–85%+ depending on ARR band. The portfolio is not a random sample.

Is gross margin for AI products the same as SaaS?

There is no single ‘AI margin’; the sources are separate samples. In BVP's 2025 sample Shooting Stars sit at 60%, slightly below SaaS peers (BVP gives no SaaS figure), and Supernovas at ~25%. ICONIQ's survey gives 45% for 2025, but the text does not define which segment it measures. Do not compare these directly with Bessemer's cloud portfolio through 1H21.

Is a low gross margin bad?

In Bessemer's portfolio Twilio was strong at ~50% for much of its life; BVP ties Supernovas' low margin to trading profit for distribution. If you cannot write down why yours is low, it is a signal (our inference).

Sources

  1. 1.Bessemer, “Scaling to $100 Million” (September 21, 2021)Year and scope: 2021. Bessemer's cloud portfolio, 2010–1H21; not a random sample. Gross margin average, median and top-performing levels by ARR band.
  2. 2.Bessemer (BVP), “The State of AI 2025” (August 13, 2025)Year and scope: 2025. 20 high-growth AI startups from its portfolio and beyond; average gross margin for Supernovas and Shooting Stars. No separate SaaS figure.
  3. 3.ICONIQ, “2026 State of AI Report: The Builder's Economy” (July 2026)Year and scope: 2026. Survey of 300+ executives at software companies building AI products, self-reported; 2026 and 2027 values are projections.