\u201cThe startup world has always been a bit more of a Wild West,\u201d Chuck Eesley<\/a>, professor of management science and engineering at Stanford University<\/a>, told Bloomberg.<\/p>\n \u201cThere are no audit requirements, there are no SEC definitions, so basically there\u2019s no cop on the beat other than the VCs and acquirers doing their due diligence,\u201d he said, so that a number can \u201cmean whatever the founder needs it to mean\u201d during dealmaking or fundraising.<\/p>\n Annual recurring revenue (ARR) calculations work like this: a company takes a single month\u2019s revenue from recurring contracts and multiples it by 12 for a year-long projection. Companies that have used this practice<\/a> include Anthropic<\/a> and OpenAI<\/a>.<\/p>\n We\u2019d love to be your preferred source for news<\/a>.<\/p>\n Please add us to your preferred sources list so our news, data and interviews show up in your feed. Thanks!<\/p>\n The Bloomberg report noted that there is nothing inherently wrong with measuring growth this way, and if a company adds new subscribers each month, it can offer a more accurate glimpse into revenue than looking at past sales.<\/p>\n Advertisement: Scroll to Continue<\/p>\n Darren Yee<\/a>, a senior venture associate at NYU\u2019s Innovation Venture Fund<\/a>, told Bloomberg that\u2014until recently\u2014ARR was seen as a reliable gauge for software businesses, especially those selling predictable services to other companies.<\/p>\n \u201cThis worked really well when subscription pricing<\/a> was very straightforward,\u201d Yee said. \u201cAnd that\u2019s been true for a long time, basically up until AI.\u201d<\/p>\n However, recurring revenue gives companies a lot of freedom in how precisely to measure, meaning it\u2019s easy for startups to juke their numbers, which can vary if revenue swings from week to week or recurring subscriptions lapse.<\/p>\n Eesley said many AI business customers are eager to try new tools<\/a>, but only on a trial basis before cancelling their subscriptions. Revenue from that trial period can be considered as \u201crecurring,\u201d even if a contract doesn\u2019t renew.<\/p>\n In other AI news, OpenAI issued a report this week calling for an industrial policy<\/a> that can manage the challenges presented by the technology.<\/p>\n![\"Preferred](\"https:\/\/www.pymnts.com\/wp-content\/uploads\/2026\/02\/Google-PYMNTS-blackbox.svg\")
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