All terms
Finance
ARR (Annual Recurring Revenue)
Annualised view of recurring revenue — typically MRR × 12, used to communicate scale and as the headline number for SaaS valuations.
In plain English
What you would make over a year if nothing changed. The number you put on the cover of an investor update.
Example
$25,000 MRR × 12 = $300,000 ARR. If you signed an annual contract worth $60,000, that contract contributes $60,000 to ARR (not $720,000).
Formula
ARR = MRR × 12 (or sum of annualised contract values for the active book)
Why it matters
ARR sets the funding band. $0-$100k ARR is friends-and-family / pre-seed; $1M ARR is the typical Series A floor; $10M ARR is mid-late-stage. Knowing your ARR tells you which conversations to have.
Common mistakes
- Quoting bookings (signed contract value) as ARR
- Including non-recurring revenue (services, setup fees)
- Ignoring churn — gross ARR vs net ARR can differ by 20%+