Building sustainable growth: Importance of unit economics in scale-up companies

As is widely spoken about, the investment landscape has shifted dramatically since the heady days of 2021 and 2022. Rare are the times over the last 18 or so months when companies could raise capital based purely on top-line growth metrics. Today’s successful scale-ups understand that sustainable growth comes from solid unit economics, a principle that we have always emphasized in our investment and growth approach.

A note worth mentioning; of course, some frontier AI infrastructure companies raising hundreds of millions are in a different category altogether and we’ll return to that caveat later. For most scale-ups, though, the fundamentals of unit economics are more important than ever.

Market check: Profitability is in focus

Trends from public companies often drip into private companies, and at the top end of the market, public company profitability has rebounded strongly in recent periods. The S&P 500 posted a 12.8% blended net profit margin in Q2 2025, above last year and above the 5-year average. Earnings have now grown double-digits for three straight quarters. Investors are rewarding efficiency and durable margins, a definite signal that “profitable growth” is not just a startup mantra but the benchmark across the market.

In venture, capital is flowing, but unevenly, as Jonny Plein recently posted about. $100M+ “mega-rounds” have captured 60–80% of AI venture dollars in recent quarters, while early-stage founders find themselves competing in a more disciplined funding environment. This only sharpens the need for scale-ups to demonstrate capital efficiency and clear paths to profitability.

And while some top-tier VCs argue that traditional benchmarks like the “Rule of 40” are less relevant in a world of hyper-scalers such as Lovable or frontier AI companies, the reality is different for most investors and founders. For the majority of scale-ups, the Rule of 40 remains a practical north star: a simple metric that tells later-stage investors and acquirers whether growth is being balanced with efficiency. Outliers may bend or break the rule, but for 95% of startups, it’s still a discipline that investors expect to see.

Why unit economics matter

The shift isn’t just a temporary reaction to tighter conditions; it represents a return to business basics. Founders who prove their growth is efficient and durable are the ones who scale, stay fundable, and create lasting value. Unit economics aren’t just investor-friendly metrics; they’re operating tools.

Metrics that investors focus on

Most investors typically pay particular attention to four areas:

• Revenue Quality - Recurring vs. one-time revenue mix, ARPU trends, customer concentration

• Cost Structure - CAC and payback periods, gross margin progression, sales efficiency (Magic Number)

• Cash Flow Dynamics - Working capital requirements, cash conversion cycle, burn rate relative to growth

• Efficiency Metrics - ARR per FTE, burn multiple

What good looks like

While industry norms vary, strong unit economics typically include:

• CAC payback periods under 12 months

• Stable or improving gross margins

• Clear operating leverage

• Net revenue retention ≥100%

• Diversified customer base

• Rising ARR per FTE (typically $150k–$250k at growth stage, best-in-class >$300k) and Burn multiples (<1.0 in steady states, <1.5 while scaling)

Common pitfalls to avoid include:

• Over-prioritising top-line growth at the expense of profitability

• Underestimating the true cost of customer acquisition

• Excluding hidden costs in gross margin calculations

• Ignoring cohort analysis

• Delaying action when core metrics deteriorate

A note on 2025 AI companies

As mentioned at the top, these principles apply differently for frontier AI model and infrastructure players raising hundreds of millions to fund compute, training, and data centers. Their economics look more like capex-heavy industries and follow very different trajectories. They are important outliers, but not the focus of this article, nor the reality for the vast majority of scale-up businesses.

Looking forward

In today’s market, strong unit economics are essential. Companies that master them are:

• More resilient in downturns

• Better positioned to raise capital

• Capable of funding growth through operations

• More attractive to acquirers

Founders who build dashboards around CAC payback, burn multiple, and ARR per FTE stay in control of their destiny - raising on better terms, weathering downturns, and exiting on stronger multiples.

At JCP Growth, our role is to help founders design for sustainable growth, not just fast growth. Sometimes that means growing slower in the short term, but it almost always creates stronger, more valuable companies in the long run. The message is clear: optimising unit economics is more than investor optics - it’s the foundation for a business that can thrive in any market.