# What is ARR? Definition & Technical Mechanics

> **Source:** [SPIDITS AI Startup & Venture Intelligence Glossary](https://spidits.com/startup-glossary)  
> **Category:** Metrics  
> **Canonical Citation:** [https://spidits.com/startup-glossary/arr](https://spidits.com/startup-glossary/arr)

## Definition
ARR (Annual Recurring Revenue) is a key metric for subscription-based businesses representing the predictable recurring revenue generated by active customers over a year.

## Architectural Mechanics & Deep Dive
ARR (Annual Recurring Revenue) is a key metric for subscription-based businesses (SaaS) representing the predictable recurring revenue generated by active customers over a year. It is calculated by multiplying Monthly Recurring Revenue (MRR) by 12. ARR is a primary valuation metric tracked by late-stage venture capitalists to evaluate the scale, growth rate, and financial stability of SaaS startups.

## Industry Applications & Real-World Use Cases
SaaS recurring revenue reporting and VC valuation multiples

## Frequently Asked Questions

### How is ARR calculated?
ARR = Monthly Recurring Revenue (MRR) x 12.

### Does ARR include one-time setup fees?
No. ARR strictly includes recurring subscription revenues and excludes professional setup fees, hardware sales, or one-off services.

## Related Terminology
- [mrr](https://spidits.com/startup-glossary/mrr)
- [pre-money-valuation](https://spidits.com/startup-glossary/pre-money-valuation)
- [exit](https://spidits.com/startup-glossary/exit)

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*From the SPIDITS AI Knowledge Base (300+ terms indexed). Explore full technical definitions: [https://spidits.com/startup-glossary](https://spidits.com/startup-glossary)*