{"id":31227,"date":"2025-03-26T11:04:03","date_gmt":"2025-03-26T16:04:03","guid":{"rendered":"https:\/\/breakingintowallstreet.com\/?post_type=biws_kb&#038;p=31227"},"modified":"2025-07-16T18:20:08","modified_gmt":"2025-07-16T23:20:08","slug":"net-revenue-retention-nrr","status":"publish","type":"biws_kb","link":"https:\/\/breakingintowallstreet.com\/kb\/venture-capital\/net-revenue-retention-nrr\/","title":{"rendered":"Net Revenue Retention: Key SaaS Metric or Disguise for Disappointing Performance?"},"content":{"rendered":"<blockquote><p><strong>Net Revenue Retention Definition:<\/strong> Net Revenue Retention (NRR) for Software-as-a-Service (SaaS) companies is defined as the (Starting Recurring Revenue + Expansion Revenue \u2013 Churned Revenue) \/ Starting Recurring Revenue; it indicates how much the company\u2019s recurring revenue from <em>existing customers<\/em> is growing in each period.<\/p><\/blockquote>\n<p><center><img decoding=\"async\" class=\"aligncenter wp-image-31228 size-full\" title=\"Net Revenue Retention Definition\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26105744\/01-Net-Revenue-Retention-Definition.jpg\" alt=\"Net Revenue Retention Definition\" width=\"2210\" height=\"312\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26105744\/01-Net-Revenue-Retention-Definition.jpg 2210w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26105744\/01-Net-Revenue-Retention-Definition-300x42.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26105744\/01-Net-Revenue-Retention-Definition-1024x145.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26105744\/01-Net-Revenue-Retention-Definition-768x108.jpg 768w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26105744\/01-Net-Revenue-Retention-Definition-1536x217.jpg 1536w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26105744\/01-Net-Revenue-Retention-Definition-2048x289.jpg 2048w\" sizes=\"(max-width: 2210px) 100vw, 2210px\" \/><\/center><\/p>\n<p>This metric also goes by slightly different names, such as \u201cNet Dollar Retention\u201d and \u201cNet Dollar Revenue Retention,\u201d but they all refer to the same concept.<\/p>\n<p><strong>Many people point to Net Revenue Retention (NRR) as a key SaaS metric, but they overlook its problems and how it is often impractical to use for public companies.<\/strong><\/p>\n<p><a href=\"https:\/\/breakingintowallstreet.com\/kb\/financial-statement-analysis\/change-in-working-capital\/\" target=\"_blank\" rel=\"noopener\">Like many other financial metrics<\/a>, the NRR percentage itself does not mean much; what matters are its <em>individual components<\/em>.<\/p>\n<p>In other words, the \u201cwhy\u201d matters much more than the \u201cwhat.\u201d<\/p>\n<p>Two companies can have the same Net Revenue Retention percentage, but one could have a more stable underlying business because of the individual components:<\/p>\n<p><center><img decoding=\"async\" class=\"aligncenter wp-image-31229 size-full\" title=\"Net Revenue Retention Comparison\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26105950\/02-Net-Revenue-Retention-Comparison.jpg\" alt=\"Net Revenue Retention Comparison\" width=\"1130\" height=\"703\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26105950\/02-Net-Revenue-Retention-Comparison.jpg 1130w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26105950\/02-Net-Revenue-Retention-Comparison-300x187.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26105950\/02-Net-Revenue-Retention-Comparison-1024x637.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26105950\/02-Net-Revenue-Retention-Comparison-768x478.jpg 768w\" sizes=\"(max-width: 1130px) 100vw, 1130px\" \/><\/center><\/p>\n<p>Since most public SaaS companies do not <em>disclose<\/em> these individual components, using Net Revenue Retention as a meaningful metric in real life is difficult.<\/p>\n<p>If you\u2019re in this situation \u2013 no access to the individual components of NRR \u2013 you could use the <em>Gross Revenue Retention<\/em> as a supplemental metric.<\/p>\n<h3><strong>Files &amp; Resources:<\/strong><\/h3>\n<ul>\n<li><a href=\"https:\/\/youtube-breakingintowallstreet-com.s3.us-east-1.amazonaws.com\/Startups-VC\/Net-Revenue-Retention\/Net-Revenue-Retention-Slides.pdf\" target=\"_blank\" rel=\"noopener\">Net Revenue Retention &#8211; Slides (PDF)<\/a><\/li>\n<li><a href=\"https:\/\/youtube-breakingintowallstreet-com.s3.us-east-1.amazonaws.com\/Startups-VC\/Net-Revenue-Retention\/Net-Revenue-Retention-Examples.xlsx\" target=\"_blank\" rel=\"noopener\">Net Revenue Retention Examples (XL)<\/a><\/li>\n<li><a href=\"https:\/\/youtube-breakingintowallstreet-com.s3.us-east-1.amazonaws.com\/Startups-VC\/Net-Revenue-Retention\/Monday-Investor-Presentation.pdf\" target=\"_blank\" rel=\"noopener\">Monday.com Investor Presentation (PDF)<\/a><\/li>\n<\/ul>\n<h3><strong>Video Table of Contents:<\/strong><\/h3>\n<ul>\n<li><strong>0:00:<\/strong> Introduction<\/li>\n<li><strong>0:45:<\/strong> The Short Answer<\/li>\n<li><strong>4:38:<\/strong> Part 1: Simple and Complex Calculations<\/li>\n<li><strong>7:40:<\/strong> Part 2: Gross vs. Net Revenue Retention<\/li>\n<li><strong>8:55:<\/strong> Part 3: What\u2019s a \u201cGood\u201d Net Revenue Retention?<\/li>\n<li><strong>11:27:<\/strong> Part 4: Why AI Companies Make This Metric More Important<\/li>\n<li><strong>13:01:<\/strong> Recap and Summary<\/li>\n<\/ul>\n<h2><strong>How to Calculate Net Revenue Retention<\/strong><\/h2>\n<p>The basic calculation is simple: Take the initial recurring revenue in the period (<a href=\"https:\/\/breakingintowallstreet.com\/kb\/venture-capital\/annual-recurring-revenue-arr\/\" target=\"_blank\" rel=\"noopener\">Annualized Recurring Revenue<\/a> or Monthly or Quarterly Recurring Revenue), add the revenue from expansions (upsells, price increases, etc.), and subtract revenue lost from churn (cancellations) and downgrades:<\/p>\n<p><center><img decoding=\"async\" class=\"aligncenter wp-image-31230 size-full\" title=\"Net Revenue Retention Calculation\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110017\/03-Net-Revenue-Retention-Calculation.jpg\" alt=\"Net Revenue Retention Calculation\" width=\"1504\" height=\"498\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110017\/03-Net-Revenue-Retention-Calculation.jpg 1504w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110017\/03-Net-Revenue-Retention-Calculation-300x99.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110017\/03-Net-Revenue-Retention-Calculation-1024x339.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110017\/03-Net-Revenue-Retention-Calculation-768x254.jpg 768w\" sizes=\"(max-width: 1504px) 100vw, 1504px\" \/><\/center><\/p>\n<p>It gets slightly more complicated if you\u2019re working with <em>customer-level data<\/em> rather than high-level metrics.<\/p>\n<p>If you have access to information on individual customer spending, you can set up SUMIFS formulas that directly compare the year-over-year dollars spent to determine the Net Retention Rate by customer or industry segment:<\/p>\n<p><center><img decoding=\"async\" class=\"aligncenter wp-image-31231 size-full\" title=\"Net Revenue Retention by Customer Industry\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110041\/04-Net-Revenue-Retention-by-Industry.jpg\" alt=\"Net Revenue Retention by Customer Industry\" width=\"1890\" height=\"1558\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110041\/04-Net-Revenue-Retention-by-Industry.jpg 1890w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110041\/04-Net-Revenue-Retention-by-Industry-300x247.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110041\/04-Net-Revenue-Retention-by-Industry-1024x844.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110041\/04-Net-Revenue-Retention-by-Industry-768x633.jpg 768w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110041\/04-Net-Revenue-Retention-by-Industry-1536x1266.jpg 1536w\" sizes=\"(max-width: 1890px) 100vw, 1890px\" \/><\/center><\/p>\n<p>Since publicly traded SaaS companies do not disclose information this detailed, these calculation methods are viable only when you have access to proprietary data from the company (e.g., you are potentially investing in it or advising it in a deal).<\/p>\n<div class='code-block code-block-9' style='margin: 8px 0; clear: both;'>\n<div class=\"kb-adinsert-modal\">\n    <div class=\"kb-adinsert-top\">\n      <div class=\"media\">\n          <img decoding=\"async\" class=\"alignnone size-full wp-image-28448\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2024\/05\/22172829\/vc-tile.png\" alt=\"Venture Capital & Growth Equity Modeling\" width=\"128\" height=\"128\" \/>\n      <\/div>\n      <div class=\"content\">\n          <h3>Model and Value Startups, Understand Cap Tables, and Prepare for VC Interviews<\/h3>\n      <\/div>\n    <\/div>\n    \n    <div class=\"full_text\">\n    \t<ul>\n        \t<li>\n            \t<h4>Evaluate companies and deals like a pro<\/h4>\n              <p>You\u2019ll understand cap tables, startup\/growth valuations, and exits<\/p>\n\t\t\t    <\/li>\n          <li>\n          \t<h4>Master financial modeling<\/h4>\n            <p>You\u2019ll build forecasts and analyze metrics for tech and biotech startups<\/p>\n\t\t\t    <\/li>\n          <li>\n          \t<h4>Complete 9 case studies<\/h4>\n            <p>You\u2019ll learn the numbers and how to make investment recommendations\n\n<\/p>\n\t\t\t  <\/li>\n      <\/ul>\n        \n      <a class=\"cta-link orange-button-medium\" href=\"https:\/\/breakingintowallstreet.com\/venture-capital-modeling\/\" target=\"_blank\">Full Details<\/a>\n      \n      <a class=\"cta-link orange-button-medium bg-blue\" href=\"https:\/\/biws-support.s3.us-east-1.amazonaws.com\/Course-Outlines\/Venture-Capital-Modeling-Course-Outline.pdf\" target=\"_blank\" rel=\"noopener\">Short Outline<\/a>\n    <\/div>\n<\/div>\n<\/div>\n\n<h2><strong>Gross vs. Net Revenue Retention<\/strong><\/h2>\n<p>A closely related metric is <strong>Gross Revenue Retention<\/strong>, which <strong>ignores<\/strong> New Customer and Expansion Recurring Revenue:<\/p>\n<p><strong>Gross Revenue Retention<\/strong> = (Starting Recurring Revenue \u2013 Churned Revenue) \/ Starting Recurring Revenue<\/p>\n<p>You can see examples for our simple SaaS startup below:<\/p>\n<p><center><img decoding=\"async\" class=\"aligncenter wp-image-31232 size-full\" title=\"Gross Revenue Retention\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110111\/05-Gross-Revenue-Retention.jpg\" alt=\"Gross Revenue Retention\" width=\"1486\" height=\"616\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110111\/05-Gross-Revenue-Retention.jpg 1486w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110111\/05-Gross-Revenue-Retention-300x124.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110111\/05-Gross-Revenue-Retention-1024x424.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110111\/05-Gross-Revenue-Retention-768x318.jpg 768w\" sizes=\"(max-width: 1486px) 100vw, 1486px\" \/><\/center><\/p>\n<p>Gross Revenue Retention is useful because it focuses on <strong>the downside risk<\/strong> in the company\u2019s revenue because it\u2019s affected only by cancellations.<\/p>\n<p>Using these two metrics together tells you how dependent a company is on extracting more value from its existing customers.<\/p>\n<p>For example, consider Companies A and B, with the same Net Revenue Retention but very different components and Gross Revenue Retention numbers:<\/p>\n<p><center><img decoding=\"async\" class=\"aligncenter wp-image-31233 size-full\" title=\"Net vs. Gross Revenue Retention\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110135\/06-Net-vs-Gross-Revenue-Retention.jpg\" alt=\"Net vs. Gross Revenue Retention\" width=\"1130\" height=\"687\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110135\/06-Net-vs-Gross-Revenue-Retention.jpg 1130w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110135\/06-Net-vs-Gross-Revenue-Retention-300x182.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110135\/06-Net-vs-Gross-Revenue-Retention-1024x623.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110135\/06-Net-vs-Gross-Revenue-Retention-768x467.jpg 768w\" sizes=\"(max-width: 1130px) 100vw, 1130px\" \/><\/center><\/p>\n<p>If you didn\u2019t have access to the individual components of NRR, you might never realize how Company B is a more stable business due to the much lower Churn Rate \u2013 but if you have the Gross Revenue Retention metric, you can at least get a hint.<\/p>\n<h2><strong>Why Net Revenue Retention Can Be Deceptive or Impractical<\/strong><\/h2>\n<p>Unfortunately, publicly traded SaaS companies rarely disclose the calculations behind their Net Revenue Retention numbers.<\/p>\n<p>They <em>love<\/em> to tout their numbers, especially if they\u2019re over 100% for many periods, but they rarely disclose the details behind them.<\/p>\n<p>This makes NRR not especially useful in real life unless the company is a client or potential investment, and you have access to its internal financial information.<\/p>\n<p>Looking at the lump-sum NRR number without breaking it into segments, such as by average customer value or industry, also disguises potentially concerning trends:<\/p>\n<p><center><img decoding=\"async\" class=\"aligncenter wp-image-31234 size-full\" title=\"Monday.com - Overall Net Revenue Retention\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110206\/07-Monday-Overall-Net-Revenue-Retention-scaled.jpg\" alt=\"Monday.com - Overall Net Revenue Retention\" width=\"2560\" height=\"1305\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110206\/07-Monday-Overall-Net-Revenue-Retention-scaled.jpg 2560w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110206\/07-Monday-Overall-Net-Revenue-Retention-300x153.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110206\/07-Monday-Overall-Net-Revenue-Retention-1024x522.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110206\/07-Monday-Overall-Net-Revenue-Retention-768x392.jpg 768w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110206\/07-Monday-Overall-Net-Revenue-Retention-1536x783.jpg 1536w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110206\/07-Monday-Overall-Net-Revenue-Retention-2048x1044.jpg 2048w\" sizes=\"(max-width: 2560px) 100vw, 2560px\" \/><\/center><\/p>\n<h2><strong>What is a Good Net Revenue Retention Rate? How Do You Interpret It?<\/strong><\/h2>\n<p>Most SaaS companies aim for Net Revenue Retention rates above 100%.<\/p>\n<p>If they can achieve this, their revenue must <em>stay the same or increase<\/em> in the period.<\/p>\n<p>It stays the same if they win no new customers in the period and increases if they win even one new customer.<\/p>\n<p>According to <a href=\"https:\/\/www.saas-capital.com\/blog-posts\/what-is-a-good-retention-rate-for-a-private-saas-company\/\" target=\"_blank\" rel=\"noopener\">SaaS Capital surveys<\/a>, the median Net Revenue Retention Rate is 102%, and the median Gross Retention Rate is 91%.<\/p>\n<p>A higher Net Revenue Retention Rate also leads to higher revenue growth, which tends to produce higher <a href=\"https:\/\/breakingintowallstreet.com\/kb\/valuation\/valuation-multiples\/\" target=\"_blank\" rel=\"noopener\">valuation multiples<\/a> (such as Enterprise Value \/ Revenue or Enterprise Value \/ ARR). It may also affect metrics like <a href=\"https:\/\/breakingintowallstreet.com\/kb\/venture-capital\/rule-of-40\/\" target=\"_blank\" rel=\"noopener\">the Rule of 40<\/a>.<\/p>\n<p>Net Revenue Retention tends to be <strong>lower<\/strong> for consumer SaaS companies and firms selling lower-priced products\/services to small businesses.<\/p>\n<p>Revenue from small businesses and consumers is easier to \u201cwin\u201d than contracts for $100K or $500K per year with huge companies, but it also goes away more easily when consumer spending or small-business confidence falls.<\/p>\n<p>As an example, here\u2019s Monday.com\u2019s Net Revenue Retention by quarter over the past few years:<\/p>\n<p><center><img decoding=\"async\" class=\"aligncenter wp-image-31235 size-full\" title=\"Monday.com - Net Dollar Retention Rate by Customer Segment\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110238\/08-Monday-Net-Dollar-Retention-Rate-by-Segment-scaled.jpg\" alt=\"Monday.com - Net Dollar Retention Rate by Customer Segment\" width=\"2560\" height=\"1267\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110238\/08-Monday-Net-Dollar-Retention-Rate-by-Segment-scaled.jpg 2560w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110238\/08-Monday-Net-Dollar-Retention-Rate-by-Segment-300x148.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110238\/08-Monday-Net-Dollar-Retention-Rate-by-Segment-1024x507.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110238\/08-Monday-Net-Dollar-Retention-Rate-by-Segment-768x380.jpg 768w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110238\/08-Monday-Net-Dollar-Retention-Rate-by-Segment-1536x760.jpg 1536w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2025\/03\/26110238\/08-Monday-Net-Dollar-Retention-Rate-by-Segment-2048x1013.jpg 2048w\" sizes=\"(max-width: 2560px) 100vw, 2560px\" \/><\/center><\/p>\n<p>Our interpretation is that there was a \u201cCOVID bump\u201d as companies and individuals stayed inside and spent more money on online products and services, resulting in lower cancellation rates and more upgrades to higher-priced plans.<\/p>\n<p>However, companies reassessed their spending and business needs as the world opened up again, and cancellation and upgrade rates returned to their normal levels.<\/p>\n<p><strong>The most concerning point is that the NRR seems to have <u>fallen the most for the highest-spending customers<\/u> \u2013 those with ARRs above $100K.<\/strong><\/p>\n<p>This is a negative sign because this segment has also been growing quickly, and the retention metrics should be <em>better<\/em> for these large enterprises.<\/p>\n<p>We need to complete a full analysis of the company\u2019s financials to say anything more substantial, but our quick impression is that despite the company\u2019s impressive revenue growth, its Net Retention Rate metrics point to possible risk factors.<\/p>\n<h2><strong>Why AI Will Make Net Revenue Retention Even More Important<\/strong><\/h2>\n<p>Many AI companies have generated buzz for <a href=\"https:\/\/www.wing.vc\/content\/ai-growing-faster-than-saas\" target=\"_blank\" rel=\"noopener\">reaching high revenue levels very quickly<\/a>.<\/p>\n<p>But the saying \u201cEasy come, easy go\u201d is appropriate here.<\/p>\n<p>Since it\u2019s faster and easier to create these products and services, there\u2019s also far more competition, and customers can easily switch to different providers.<\/p>\n<p>Companies have studied this phenomenon and found that AI vendor churn is often <strong>30 \u2013 40%<\/strong> (<a href=\"https:\/\/www.linkedin.com\/pulse\/why-ai-driving-unprecedented-vendor-churn-new-era-rapid-tdlxc\/\" target=\"_blank\" rel=\"noopener\">source<\/a>), which is far higher than the traditional ~10% for enterprise software.<\/p>\n<p>Many AI companies can offset this high cancellation rate by winning enough new customer accounts.<\/p>\n<p>But eventually, especially as the market matures, investors will likely pressure them to disclose their Gross and Net Revenue Retention metrics in more detail \u2013 or at least provide the cancellation rates.<\/p>\n<p>Without that detail, simple growth rates and the Net Revenue Retention metric alone can disguise many underlying problems with a business.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Net Revenue Retention (NRR) for Software-as-a-Service (SaaS) companies is defined as the (Starting Recurring Revenue + Expansion Revenue \u2013 Churned Revenue) \/ Starting Recurring Revenue; it indicates how much the company\u2019s recurring revenue from existing customers is growing in each period.<\/p>\n","protected":false},"featured_media":0,"template":"","class_list":["post-31227","biws_kb","type-biws_kb","status-publish","hentry","kb_category-venture-capital"],"acf":[],"_links":{"self":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/biws_kb\/31227","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/biws_kb"}],"about":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/types\/biws_kb"}],"wp:attachment":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/media?parent=31227"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}