Monthly Recurring Revenue (MRR) is the total amount of recurring revenue generated by a subscription-based business each month. The change in MRR compared to a previous period in time gives the MRR Growth Rate.
MRR Growth Rate measured over time helps you track the rate at which your business is growing, and lets you rectify slow growth or drawn-out declines in growth. To improve your MRR Growth Rate, it is helpful to focus on acquisition along with other factors such as retention, expansion, and pricing.
The change in MRR in any given month expressed as a percentage is MRR growth rate. The change in MRR refers to the starting MRR for that given month +new customer MRR +expansion MRR -churned MRR. Acquisition of new customers increases the new customer MRR and therefore increases the growth rate if the speed at which you acquire new customers increases.
Businesses use this metric to understand how quickly the business is growing from a revenue perspective. For venture backed companies, it is particularly important since you're trying to raise new rounds at higher valuations every 18-24 months in the early stages. Technically your valuation should be a function of your revenue (although this isn't always true) and therefore you want to be growing MRR quickly to keep on pace with valuations for the next round of fundraising. A more simplified explanation is just to show investors that the company has the ability to quickly scale.
