VC Metrics & Performance
What is NRR (Net Revenue Retention)?
NRR measures how much revenue a company retains and expands from its existing customer base over time, accounting for churn, contraction, and expansion. NRR above 100% means existing customers are worth more over time — a hallmark of strong SaaS businesses.
Net Revenue Retention (NRR) — sometimes called Net Dollar Retention (NDR) — is calculated by taking a cohort of customers at the start of a period, then measuring their total revenue at the end of that period, including:
- Revenue lost from churn (customers who left) - Revenue lost from downgrades (customers who downgraded plans) - Revenue gained from expansion (upsells, seat adds, usage growth)
NRR = (Starting MRR + Expansion MRR - Contraction MRR - Churn MRR) / Starting MRR × 100
If you start with $1M MRR from a cohort, lose $50K to churn, lose $30K to downgrades, but gain $150K from expansion, your NRR is: ($1M + $150K - $30K - $50K) / $1M = 107%
Benchmarks: - 120%+ — Best-in-class (Snowflake, Datadog territory) - 110–120% — Strong - 100–110% — Good - Below 100% — Net contracting (churn outpaces expansion)
Why it matters to VCs: a business with NRR above 100% grows revenue from existing customers even with zero new customer acquisition. This compounding effect is what makes top SaaS businesses so valuable. NRR above 120% is often cited as a key threshold for top-tier growth-stage VC investment.