Monthly Recurring Revenue (MRR) is the total monthly value of a company’s customer contracts. MRR is one of the most popular SaaS metrics, especially (vis a vis ARR) for SMB and consumer SaaS companies that sell month-to-month contracts, as it does not imply customers sign annual contracts. MRR applies to subscription SaaS businesses, but is sometimes also used to refer to monthly revenue for companies with relatively consistent monthly revenue, like usage or transaction based SaaS businesses. For a given month x:
MRR = the sum of monthly subscription revenue from all customers as of the end of a period
Another way to think about MRR is: given a customer's contract at the end of a month, how much will they spend the next month? If a customer ends March with 10 seats, each of which cost $10 per month, then MRR = $100.
Growth Accounting can be applied to MRR, breaking it into its component parts: Retained MRR, New Sales MRR, Expansion MRR, Contraction MRR, Churned MRR, Resurrected MRR, and Net New MRR.
Benchmarks: MRR and MRR growth are some of the most important metrics used by VCs. As a rule of thumb, investors are seeking:
Series A: $100k+ MRR, 3x Year over Year Growth (10% CMGR)
Series B: $500k+ MRR, 2.5x Year over Year Growth (8% CMGR)
Series C: $1m+ MRR, 2x Year over Year Growth (6% CMGR)
It’s important to note that VCs are typically seeking to invest in companies with top decile growth rates and consider many factors when making investments. Companies that don’t hit these benchmarks can still get funded, or continue to grow their businesses with non-VC capital.
Growth Rates: Period over Period, Year over Year, CMGR
Settings: Segments, Date Range, Date Aggregation, Revenue Type
