Cash Conversion Score (Bessemer Atlas)

Author: Bessemer Venture Partners (Atlas) URL: https://www.bvp.com/atlas/cash-conversion-score One-line: Bessemer’s Cash Conversion Score — current ARR divided by net capital consumed — and the finding that companies above 1.0x returned an average IRR of 120%, twice the average below it.

Key claims

• Definition: current ARR ÷ (total capital raised − cash), i.e. equity plus debt minus cash on hand.
• Benchmark: a company with a CCS above 1.0x yielded an average IRR of 120%, 2x the average for companies below 1.0x.
• The takeaway is not to starve the company of capital: the great companies used capital to catalyze growth — great scores came from growing revenue alongside the capital base. Two charts from the piece are archived below.

Notable quotes

• Reviewed Bessemer Venture Partners work on Cash Conversion Score - https://www.bvp.com/atlas/cash-conversion-score/ SaaS Metrics
  • Definition: current ARR / Total capital raised - Cash (equity + debt - cash)
  • Benchmark: “company that had a Cash Conversion Score higher than 1.0x yielded an average internal rate of return (IRR) of 120%, which is 2x higher than the average IRR for a company with a CCS <1.0x”
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  • “It takes financing to build a market-leading company. Instead, the takeaway is that the great companies can use the capital raised to catalyze growth. They built their fantastic Cash Conversion Scores not by starving themselves of capital but rather through growing revenue alongside their capital base.
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How it connects

• Cash Conversion Score
• Bessemer Venture Partners
• SaaS Metrics
• Capital Efficiency
• ARR