ARR

| startups | biz | bullshit |

*raspy old man voice*

Back in my day ARR used to mean something.

Three key components:

I have no idea what ARR means now.

First we saw usage-based-pricing models touting eARR where the e = expected (I always joke that the e stands for Enron). Now we have all these AI companies changing the A from annual to annualized which is not the same thing.

This is how the market collapses because we’re making decisions based on revenue multiples but the formula for ARR has reached its peak bullshit level and is only rising up from here.

Modern Definition of ARR

Annual12 Recurring3 Revenue4

  1. expected ↩︎

  2. annualized ↩︎

  3. we expect some people to stick around for longer than a month ↩︎

  4. we’ve sent an invoice to our customers finance team with net 90 terms and they assure us they’ll pay us soon ↩︎

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