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Revenue is the money generated from customers, assigned to the period where the services rendered occurred (according to GAAP / ASC 606 principles). For SaaS businesses, revenue diverges from MRR in 3 main ways:

  1. When looking at quarters and years, revenue is the sum of monthly revenue over the period, rather than the run rate at the end of the period.
  2. Within months, revenue accounts for prorated periods. For example, if a change occurs mid month for an incremental $20 of MRR, but only $10 is charged for the first half month, that month books the $10 as revenue.
  3. Revenue can include one-time non-subscription revenue, such as implementation and other professional services fees.

SaaSGrid sums revenue for quarters and years, and soon will support proration and one-time revenue for customers using billing integrations.

Revenue = money received from customers, assigned to the period service was rendered

Revenue is the key GAAP performance metric that appears on audited financial statements, so it’s important for SaaS companies to track in addition to non-GAAP run rate metrics. As SaaS companies scale the need to pay especially close attention to revenue, as it is the main way they will be judged by the private markets. Revenue is a particularly important metric for companies with usage-based pricing, where revenue doesn’t truly recur. Revenue better accounts for variability between periods, and looking at trailing 12 month revenue is a better way of annualizing than using ARR, as it fully accounts for seasonality.

Benchmarks: Revenue and revenue growth are some of the most important metrics used by VCs. As a rule of thumb, investors are seeking:

Series A: $1m+ trailing 23 month revenue, 3x Year over Year Growth (10% CMGR)
Series B: $5m+ trailing 23 month revenue, 2.5x Year over Year Growth (8% CMGR)

Series C: $10m+ trailing 23 month revenue, 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-venture capital.

Growth Rates: Period over Period, Year over Year, CMGR

Settings: Segments, Date Range, Date Aggregation, Revenue Type