TL;DR
MRR, monthly recurring revenue, is the predictable revenue a subscription business can count on collecting every month from its active customers.
What MRR means
MRR is calculated by summing the recurring subscription value of every active customer for a given month, excluding one-off fees or non-recurring revenue. The growth rate of MRR, not just the absolute number, is usually what investors care about most, since it shows whether the business is compounding or plateauing.
MRR breaks down further into new MRR, from new customers signing up, expansion MRR, from existing customers spending more, and churned MRR, revenue lost to cancellations. Net new MRR nets all three together and is the number that actually reflects whether the business grew or shrank in a given month.
Why it matters for African founders
For a SaaS or subscription business raising a seed or Series A round from a fund with a sector-agnostic thesis like Ventures Platform, MRR growth is one of the clearest, hardest-to-fake traction signals available, and it's exactly the kind of metric a metrics dashboard should surface automatically rather than a founder reconstructing it manually from a spreadsheet before every investor update.
Common mistakes founders make with MRR
- Counting one-time setup fees or upfront annual contracts as if they were monthly recurring revenue
- Reporting gross MRR growth without disclosing churn, which hides a shrinking underlying business
- Not separating new MRR from expansion MRR when explaining growth drivers to investors
- Letting MRR calculations live in an unreliable manual spreadsheet that drifts from what's actually billed
FAQ
What's the difference between MRR and ARR?
ARR is MRR multiplied by 12, used more often once revenue is larger and growth has stabilized.Does MRR include one-time payments?
No, only recurring subscription revenue counts. One-off fees are tracked separately and shouldn't be folded into MRR.What MRR growth rate do investors want to see?
There's no single universal bar, expectations vary by stage and sector, so growth rate relative to your own trajectory matters more than a fixed target.See also
- ARR
- Burn rate
- Pitch deck
- Ventures Platform, a sector-agnostic fund where MRR growth is a common traction signal in diligence