TL;DR: MRR is the total subscription revenue a company expects to collect each month, expressed as a predictable, normalised figure. It is the primary growth metric for subscription-based businesses and a core input in venture debt underwriting.
MRR measures the recurring revenue a business generates each month from active subscriptions or contracts. It excludes one-time payments, setup fees, and variable usage charges. For SaaS companies and other subscription businesses, MRR is the clearest signal of business health and growth trajectory.
The standard formula:
MRR = Total annual contract value / Number of active subscribers / 12
MRR is simply ARR divided by 12. ARR is a run rate financial metric that helps report company scale at a moment in time.
What is a good MRR growth rate? For early-stage SaaS, 5-10% month-over-month is considered very strong. Growth rates vary significantly by stage, pre-product-market-fit companies can grow faster, while companies approaching $10M ARR typically see rates slow to 2-5% monthly.
Is MRR the same as monthly revenue? No. MRR captures only recurring, contracted revenue. A company with $500K in total monthly revenue but $100K from one-time professional services has $400K in MRR.
Do venture debt lenders look at MRR or ARR? Yes. Both present the same fundamental information. ARR is used to assess whether a company clears the minimum thresholds and determines advance rates. Growth rates in ARR/MRR are used to assess trajectory and risk.
Can pre-revenue companies qualify for venture debt? Generally no. Venture debt is designed for companies with established, predictable revenue. Flow Capital requires a minimum of $2.5M ARR.
Related terms: ARR · Burn Rate · Runway · Venture Debt · Capital Stack
