Monthly Recurring Revenue (MRR) for SaaS at Series A

Ehsan's Analysis

MRR decomposition tells you more about business health than the topline number. Break it into New MRR, Expansion MRR, Contraction MRR, and Churn MRR. The ratio of Expansion to Churn is the single best predictor of long-term SaaS valuation. Companies with Expansion/Churn ratio above 1.5 (meaning expansion revenue exceeds churn by 50%+) trade at 15-25x ARR. Below 0.8, you are fighting gravity. Twilio had a 170% net dollar retention rate — for every $1 of revenue that churned, $1.70 of expansion replaced it — which is why it commanded a premium multiple despite never being profitable. The tactical lesson: track your MRR waterfall weekly, not monthly. Monthly reporting hides the timing of churn (concentrated in specific weeks? triggered by billing cycles?) and misses expansion signals (customers upgrading mid-cycle). Weekly MRR decomposition gives you 4x the signal and lets you intervene before churn finalizes.