Cash Conversion Score

Bessemer Venture Partners’ metric for capital efficiency: current ARR ÷ (total capital raised − cash on hand). A score above 1.0x means the company has generated more in annual recurring revenue than the net capital it consumed to get there.

The benchmark finding from Bessemer’s Atlas piece: companies with a CCS above 1.0x yielded an average IRR of 120% — roughly twice the average for companies below 1.0x. The key nuance is that the best scores came not from starving the company of capital but from growing revenue alongside the capital base — great companies used capital to catalyze growth, not just fund losses.

Related: Jay Vas’s 2020 thread used Gymshark’s £53m cash pile as a worked example of related mechanics (negative Cash Conversion Cycle in ecommerce). See also Cash Conversion Score (Bessemer Atlas) for the full piece with benchmark charts.

Where this appears

• Last Week @theSamParr Shared Gymshark’s… (tweet)
• Cash Conversion Score (Bessemer Atlas) — Kyle’s notes on Bessemer’s Atlas piece (the >1.0x → 120% IRR benchmark), March 19th, 2020.