ARR (Annual Recurring Revenue)

How it works

ARR = MRR × 12. It's the single most important metric for SaaS companies and the one VCs use to size up the business. ARR includes new subscriptions, expansion (upsell/cross-sell), and renewal — but excludes one-time professional services, setup fees, and usage-based revenue (which is reported separately as committed-vs-consumed). Series A SaaS rounds in 2024 typically require $1M–$2M ARR; Series B is usually $5M–$15M ARR.

Worked example

A SaaS company with 200 customers paying $500/month has MRR = $100K, ARR = $1.2M.

Related terms

• MRR (Monthly Recurring Revenue)
  MRR is the predictable, normalized monthly revenue from recurring subscriptions, used to track SaaS business momentum month-over-month.
• NRR (Net Revenue Retention)
  Net Revenue Retention measures the percentage of revenue retained from a cohort of customers over a year, including expansion and contraction but excluding new customers.
• Burn rate
  Burn rate is how much cash a company spends per month, net of revenue — the rate at which it's depleting its bank balance.
• Series A round
  A Series A is typically the first priced round led by an institutional VC, with a $5M–$20M check size, requiring strong evidence of product-market fit.