ARR / MRR

Predictable yearly (ARR) or monthly (MRR) subscription revenue

What it is

ARR (Annual Recurring Revenue) and MRR (Monthly Recurring Revenue) measure the predictable, subscription-based revenue a company earns each year or month. They count only recurring contract revenue and deliberately EXCLUDE one-time fees, setup charges, and variable usage. ARR is roughly MRR times twelve.

Why it matters

Recurring revenue is the lifeblood of SaaS valuation; investors pay far more for predictable ARR than for one-off sales. Mislabeling one-time revenue as ARR overstates the health of the business.

Resources

a16z, 16 More Startup Metrics

a16z.com

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