ARR
Annual recurring revenue: the annualised value of contracted, recurring subscription revenue.
Why it matters
The headline number for most software companies. Inflating it by including one-off services, pilots or non-contracted revenue is the fastest way to lose a deal, because diligence will find it.
A worked example
Twelve customers on $2,000 per month contracts is $24,000 MRR and $288,000 ARR. A one-off $50,000 implementation fee is not part of ARR.
What is typical
Expect to be asked for the split between new, expansion, contraction and churned ARR, not just the total.
Related terms
Net revenue retention
Revenue from your existing customer base this period versus the same cohort last period, including expansion, contraction and churn.
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