Glossary
Magic Number
A SaaS sales-efficiency metric — new ARR added in a quarter divided by sales & marketing spend in the prior quarter. Above 1.0 is healthy growth-mode efficiency.
By Amit Tyagi, Fitoor Capital · AletheiaAI Glossary
Definition
Magic Number is a SaaS sales-efficiency metric introduced by Scale Venture Partners. It measures how much new ARR a company generates per rupee of sales and marketing spend.
Formula: Magic Number = (New ARR This Quarter × 4) / S&M Spend Last Quarter. The 4x is to annualise the quarterly ARR addition.
Benchmarks: above 1.0 indicates highly efficient growth (₹1 of S&M spend produces ₹1+ of new ARR annualised). 0.5-1.0 is acceptable in heavy investment mode. Below 0.5 signals inefficient sales motion.
India Context
Indian SaaS investors increasingly use Magic Number as a Series A and Series B benchmark. Best-in-class Indian SaaS sustains Magic Number 1.0-1.5 at scale; below 0.5 typically fails to raise Series A. The metric is harder to interpret at pre-revenue and seed stages.
Example
A B2B SaaS adds ₹2Cr new ARR in Q2 after spending ₹1.5Cr on S&M in Q1. Magic Number = (₹2Cr × 4) / ₹1.5Cr = 5.3. This is exceptionally high — typical for very early or PLG companies. Mature companies typically land between 0.7-1.3.
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