The SaaS Academy

When you open a Confidential Information Memorandum (CIM) or a management presentation, the headline Annual Recurring Revenue (ARR) number tells a story. It’s the management narrative. It is exactly the ARR that the seller and their bankers want you to believe the company is generating.

But as a software investor, you don’t buy the narrative. You underwrite the real story. And finding the real story requires a deep dive into their customer revenue.

The gap between the ARR reported in a CIM and the verified ARR you can actually underwrite is where valuations swing, deals get re-traded, and investment memos either stand up to scrutiny or fall apart. A management team might legitimately believe their ARR is $12M, but after scrubbing the contract data, stripping out one-time fees, and fixing annualization logic, the defensible number might be $10.5M. At a 6x revenue multiple, that $1.5M discrepancy is a $9M swing in valuation.

If you are an analyst or associate running point on software...