Post by Augustine Chiagozie (@pabloexchange)

📊 AI startups are inflating ARR numbers to look bigger

TechCrunch spoke with founders, investors, and finance operators who say many AI startups are stretching the meaning of ARR to boost growth narratives.

The main trick is replacing real ARR with “contracted ARR” or annualized projections. In some cases, startups reportedly counted revenue from customers who were not fully onboarded yet, long pilot programs, or contracts that may never convert into payments.

Several investors admitted the practice is common and often tolerated because everyone is chasing the same AI growth story. One VC said some companies report CARR that is 70% higher than actual ARR.

The pressure comes from AI valuations. Investors now expect companies to jump from $1 million to $100 million revenue at record speed.

In AI, revenue headlines are becoming part of the marketing stack.

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