One founder just called out something the VC community has been quietly living with for a while. AI startups are reporting CARR, which counts revenue that hasn't been invoiced and may never be, to the press while labeling it ARR. The gap between those two numbers, per the CEO who went public about it, can run 3 to 5x.

Here's the part that should make you uncomfortable if you're buying AI tools or evaluating vendors: the VCs aren't getting fooled. They read the contracts. The people getting fooled are journalists writing the coverage you're using to make procurement decisions, and employees who think they're joining a rocketship.

A few things worth sitting with:
- Free pilots counted as revenue is not a new trick. It just has a better outfit now.
- If you're a CIO evaluating an AI vendor's "momentum," ask one question: is that ARR live and invoiced, or contracted?
- The companies chasing inflated benchmarks they can't actually hit are the ones that will blow up your implementation 18 months in.

We've been here before. The numbers looked great right up until they didn't.

https://www.fastcompany.com/91532292/ai-startups-arr-carr-scott-stevenson
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