What is the difference between ARR and Recognized Revenue?

ARR measures the amount of money a SaaS startup is set to receive on an annual basis from its existing customers. It is usually calculated as the sum of subscriptions for the previous 12 months. ARR is a key indicator to investors when evaluating the potential of a SaaS startup. Recognized revenue, on the other hand, is the amount of revenue a company has earned and can be reported in the company’s financial statements. Banks and other non-equity lenders often focus on a SaaS startup’s recognized revenue to make lending decisions.