Glossary
MRR
Monthly Recurring Revenue — the monthly value of a subscription business's current contracted revenue.
By Amit Tyagi, Fitoor Capital · AletheiaAI Glossary
Definition
MRR (Monthly Recurring Revenue) is the predictable monthly revenue generated from active subscriptions or contracts. It's the operational heartbeat of a SaaS business — tracked weekly by founders, reviewed monthly by boards, and used to calculate ARR for fundraising.
MRR has four components: new MRR (from new customers), expansion MRR (from existing customers upgrading or buying more), contraction MRR (from downgrades), and churned MRR (from cancellations). Net new MRR = new + expansion - contraction - churn. This breakdown tells the health story of a subscription business far better than gross MRR alone.
India Context
Indian SaaS founders often conflate MRR with monthly cash collected or monthly invoiced amounts. These differ: a customer on annual billing who pays upfront generates 12 months of MRR at once but only 1/12th of that as cash per month. For fundraising, use contracted MRR. For cash flow, track collections separately.
India benchmark: a well-performing Indian B2B SaaS seed-stage startup targets ₹20–50 lakh MRR. At Series A pitch, ₹75 lakh–₹2 crore MRR is a strong signal. Below ₹30 lakh MRR for a Series A pitch is difficult unless growth rate is exceptional.
Example
A startup starts the month at ₹40 lakh MRR. They add 5 new customers (₹2L each) = +₹10L new MRR. 3 customers upgrade from ₹2L to ₹3L = +₹3L expansion MRR. 1 customer downgrades from ₹2L to ₹1L = -₹1L contraction. 2 customers cancel (₹2L each) = -₹4L churn. Ending MRR = ₹40L + ₹10L + ₹3L - ₹1L - ₹4L = ₹48 lakh MRR. 20% monthly growth.
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