Startup & Venture Basics Beginner

Monthly Recurring Revenue (MRR)

The total predictable revenue a company earns each month from subscriptions.

Definition

MRR is the sum of all recurring subscription revenue normalized to a monthly figure. It includes new MRR (from new customers), expansion MRR (upgrades), and subtracts churned MRR (cancellations) and contraction MRR (downgrades). MRR gives a real-time pulse on business health and is the building block for ARR.

Why it matters

MRR growth rate is one of the strongest signals of company health. Consistent MRR growth means the company is on a path to higher valuations and a better outcome for your equity.

Example

In January, a company adds 20 new customers at $500/month ($10K new MRR), 5 existing customers upgrade adding $2K expansion MRR, and 3 customers cancel losing $1.5K. Net new MRR is $10.5K.

Related terms

Annual Recurring Revenue (ARR)
The annualized value of all active subscriptions or recurring contracts.
Churn
The rate at which customers cancel or stop paying for a product.
Net Revenue Retention (NRR)
Revenue from existing customers after expansions, contractions, and churn, as a percent of starting revenue.
Bookings
The total value of new contracts signed in a period, regardless of when revenue is recognized.
Burn Rate
How much cash a company spends per month beyond what it earns.

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This definition is an educational summary. It is not legal, tax, or investment advice. Specific terms in your equity grant or company documents may differ.