# What is Gross Margin? Definition & Technical Mechanics

> **Source:** [SPIDITS AI Startup & Venture Intelligence Glossary](https://spidits.com/startup-glossary)  
> **Category:** Metrics  
> **Canonical Citation:** [https://spidits.com/startup-glossary/gross-margin](https://spidits.com/startup-glossary/gross-margin)

## Definition
Gross Margin is the percentage of revenue remaining after subtracting the cost of goods sold (COGS), showing the core profitability of a product.

## Architectural Mechanics & Deep Dive
Gross Margin is the percentage of revenue remaining after subtracting the cost of goods sold (COGS). High gross margins (e.g. >80% in SaaS) are prized because they leave more capital to invest in sales and expansion.

## Industry Applications & Real-World Use Cases
Product unit economics assessment

## Frequently Asked Questions

### Why do VCs love high gross margins?
Higher gross margins (e.g. >80% in SaaS) mean more money can be reinvested into sales, marketing, and expansion.

### What constitutes COGS for software?
Server hosting costs, customer support salaries, and third-party APIs integrated into the product.

## Related Terminology
- [unit-economics](https://spidits.com/startup-glossary/unit-economics)
- [arr](https://spidits.com/startup-glossary/arr)
- [ebitda](https://spidits.com/startup-glossary/ebitda)

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*From the SPIDITS AI Knowledge Base (300+ terms indexed). Explore full technical definitions: [https://spidits.com/startup-glossary](https://spidits.com/startup-glossary)*