TechCrunch reported in May that VCs and founders use inflated "ARR" to crown AI startups. Its sources largely confirmed that fudged annual recurring revenue in public declarations is common, and Spellbook's co-founder called inflated AI startup revenue figures a "huge scam."
Fortune has reported that some companies sign contracts with kill provisions, so they claim booked ARR while customers keep an exit. Some investors describe ARR as a metric that does not truly work but that worked well enough for them to keep using it.
The practical lesson for buyers and investors is to ask what ARR means in each claim: annualized usage, signed contracts, or recurring subscriptions. The company-reported figures we cite elsewhere on this site, from Cognition to Lovable, are self-reported and should be read that way.
Source: TechCrunch