A VC explains the four different definitions of ARR founders use today
Konstantine · x · 2026-10-27
A venture investor explains that "ARR" now means at least four different things:
- Annual Recurring Revenue: the original meaning — a customer signs and pays for a year, auto-renewing.
- Annualized Recurring Revenue: quarterly billing ×4.
- Annualized Run Rate: last quarter ×4, possibly including one-time work or services.
- Increasingly, last month ×12 is also called "Annualized Run Rate."
Most investors accept any definition as long as it's stated upfront. The risk isn't deliberate deception but founders and investors interpreting "ARR" differently — the fix is simply to define it clearly.
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