Glossary
TCV vs ACV (Total Contract Value vs Annual Contract Value)
TCV is the total contract value over its full duration; ACV is the annualised contract value. Both used in SaaS reporting; the difference matters at multi-year contracts.
By Amit Tyagi, Fitoor Capital · AletheiaAI Glossary
Definition
TCV (Total Contract Value) is the total value of a customer contract over its entire duration. ACV (Annual Contract Value) is the annualised value, dividing TCV by years.
Formula: TCV = Contract Value over full term. ACV = TCV / Number of years in contract.
Example: a 3-year contract worth ₹6L total has TCV = ₹6L, ACV = ₹2L. A 1-year contract worth ₹2L has TCV = ACV = ₹2L. Both contracts look identical on ACV basis but have very different cash flow timing.
India Context
Indian SaaS investors typically use ACV in headline ARR calculations because it's comparable across contracts. TCV matters for cash-flow forecasting and revenue recognition under Ind AS 115 standards.
Watch for inflated headline numbers: founders sometimes report TCV as if it were ARR. A ₹3Cr ARR claim that turns out to be ₹3Cr TCV across 3-year contracts is actually ₹1Cr ARR — a meaningful difference at Series A.
Example
An enterprise SaaS signs a 3-year contract for ₹15L total. TCV = ₹15L. ACV = ₹5L (₹15L / 3 years). Booked revenue is ₹15L in the period of signing; recognised revenue is ₹5L per year over 3 years.
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