VC & PE Glossary
What Is Net Revenue Retention (NRR)?
Updated
Definition
Net revenue retention (NRR) measures how much recurring revenue from an existing customer cohort changes over a period — including expansion, contraction, and churn — expressed as a percentage of starting ARR.
Useful for: Founders, Investors
Net revenue retention (NRR) — also called net dollar retention — tracks whether revenue from existing customers grows or shrinks over time, usually on a trailing twelve-month basis.
How it works
Cohort method: ARR from customers active twelve months ago was $10M. Today those same accounts collectively pay $11.2M after churn and expansion → NRR = 112%. New customers signed in the last year are excluded from this calculation.
Components: expansion (upsells, seat growth), contraction (downgrades), and churn (lost logos). NRR above 100% implies negative churn on dollars. Logo retention can still be lower if small accounts churn while large ones expand.
Reporting varies: some companies include price increases, usage-based overages, or professional services tied to subscriptions. Investors ask for definitions and a bridge from starting to ending ARR so NRR can be reconciled to CRM and billing data.
Why it matters
- Founders: NRR guides where to invest — customer success, product attach, pricing — versus pure new-logo sales. Weak NRR eventually caps growth no matter how much you spend on marketing.
- Investors: Best-in-class B2B SaaS often targets NRR above 110–120% at scale. Due diligence uses NRR with CAC payback and gross margin to assess efficient growth.
Common mistake
Blending new customer ARR into NRR. That inflates the metric and hides churn problems in the installed base.
Related ideas
See also negative churn, NRR bridge, gross revenue retention, and logo retention.
Related terms
- Negative Churn — Negative churn occurs when revenue expansion from existing customers — upsells, cross-sells, and seat growth — exceeds revenue lost from churn and downsells, so the retained cohort grows in value over time.
- NRR Bridge — An NRR bridge is a waterfall chart or table that decomposes net revenue retention from starting ARR to ending ARR — showing churn, contraction, expansion, and sometimes new-logo effects separately.
Common questions
Short answers for founders, LPs, and operators