Revenue recognition
When a charge becomes revenue, how recurring revenue is computed, why outside and captive revenue stay apart, and what each traction band means.
Revenue is a projection of Entries, computed under a declared Policy and split by who paid. No one types a revenue number; every report derives it from the ledger.
Earned, not collected
Cash and revenue are different facts. A payment taken before the work is a liability; it becomes revenue as the work is delivered.
| Sale | Earns |
|---|---|
| One-time Order | On delivery |
| Subscription | Day by day across the billing period |
| Metered usage | As each unit is consumed |
| Outcome | When the Customer accepts it |
| Prepaid credits | As each credit is used |
A $588 annual prepay earns $49 a month, and the rest sits as deferred revenue. A refund posts reversing Entries in the open Period; it never rewrites a locked one.
A Marketplace earns its fee, not the full amount its Customer pays. Gross order value is a volume measure, never revenue.
Recurring revenue
MRR is committed revenue plus usage revenue. Committed revenue is every Subscription, seat, and prepaid commitment normalized to one month. Usage revenue is the trailing run rate over the Policy's usage window, 30 days by default.
ARR is twelve times MRR. Each report shows the committed and usage parts side by side, so a spike in usage never reads as a new contract.
Outside and captive
Revenue from a Customer who shares no owner, Studio account, Agreement, or sibling chain with the Startup is outside revenue. Revenue from a sibling Startup or the Studio is captive revenue, recorded at its transfer price. Revenue a venue collects and pays out counts as outside revenue once its payout statement imports.
A SaaS that books dental hygiene appointments earns $6,000 a month from 40 clinics. A sibling that markets dental practices pays it another $1,500 for the same scheduler. The scheduler's own profit and loss shows $7,500, because each Startup can graduate or be sold whole.
Two readings of one ledger
The same Entries answer two different questions, and each report names the one it answers.
The legal-entity rollup asks what a Company earned. It eliminates captive revenue between Startups inside the Company and keeps it as revenue across Companies. In the example, if both Startups sit in one Company, the rollup shows $6,000.
Selection asks whether the Startup is finding fit. It reads the outcomes the Startup delivers, from its Customers' own records, whoever pays. Captive revenue alone neither proves nor disproves fit; Studio Goals count outside revenue only, as the Studio's economics explain.
Traction bands
A traction band places a Startup by its outside ARR. Bands describe traction; Lifecycle states describe what the Startup is doing, and the two never substitute.
| Band | Outside ARR |
|---|---|
| Pre-revenue | $0 |
| First revenue | At least one paid outside Order |
| $10k ARR | $10,000 or more |
| $100k ARR | $100,000 or more |
| $1M ARR | $1,000,000 or more |
Profitable is a flag beside the band, never a band of its own. It is set when Cost coverage holds at 1 or more for three straight months.
Every number cites its basis
Each revenue number carries the Policy version it was computed under. An investor can read the same Entries under a different Policy, and the result is labeled as that view. Policies lists the defaults and how to change them.
Next
- Policies: the rules behind every number.
- Unit economics: what each dollar of revenue costs.