Definition
MRR is the lifeblood of SaaS startups. Investors track MRR growth rate, net dollar retention, and the ratio of MRR to burn. GitDealFlow's engineering velocity often correlates with MRR growth, teams shipping fast tend to close more customers.
How it works in practice
Monthly Recurring Revenue is the normalized monthly value of subscription revenue: the sum of all recurring charges expected next month. It is normalized in the sense that annual contracts are divided into monthly equivalents, so a $120K annual contract contributes $10K MRR. MRR is the standard unit of SaaS growth because it strips out one-time payments and billing noise.
MRR breaks down into components that tell the real story: new MRR (from new customers), expansion MRR (upsells and upgrades), and churned MRR (cancellations and downgrades). Growth rate matters, but so does composition, a company growing MRR entirely from new customers while expansion is flat and churn is rising has a different future than one growing on all three axes. Net revenue retention bundles expansion and churn into one number investors track closely.
MRR is a lagging indicator of the product work that produces it. GitDealFlow reads the public GitHub activity of 350+ startups, tracking commit velocity, contributor growth, and repository expansion, product velocity that typically accelerates 21-47 days before a funding round is announced, per its SSRN research panel of 219 documented fundraises. For investors, engineering momentum is a leading view of the MRR line.
Key points
- MRR = normalized monthly subscription revenue; annual contracts are divided into monthly equivalents.
- The components, new, expansion, churned, tell the real story.
- Net revenue retention bundles expansion and churn into one number.
- MRR growth is lagging; the product velocity behind it is leading.
- Investors triangulate MRR claims with public engineering data.
Frequently Asked Questions
What's a good MRR growth rate?
Top-quartile SaaS startups grow MRR 15-20% month-over-month. Average is 5-10%. GitDealFlow's engineering momentum data often signals MRR acceleration before it appears in financials.
How does GitDealFlow predict MRR growth?
Engineering velocity rising 3-6 weeks before a fundraise often correlates with product velocity improvements that drive MRR acceleration.
How is MRR calculated?
Sum all recurring subscription charges normalized to monthly: monthly plans count at their monthly price, annual plans count at price divided by 12, and usage-based or tiered components are included on their expected value. Exclude one-time fees, setup charges, and non-recurring services. The result is the recurring revenue the business expects next month.
What's the difference between MRR and revenue?
Revenue is what the company actually recognizes under accounting rules, which for an annual contract can be recognized monthly as it is earned, while MRR is the normalized forward-looking value of the recurring base. MRR is a growth metric used for modeling and benchmarks; revenue is a financial statement metric used for reporting. Both matter, for different audiences.
What are new, expansion, and churned MRR?
New MRR comes from customers who were not paying before; expansion MRR comes from existing customers upgrading, adding seats, or buying add-ons; churned MRR is the recurring revenue lost to cancellations and downgrades. Net new MRR = new + expansion minus churned. The mix tells you whether growth is healthy, or whether the base is eroding while the top line grows.