Garry Tan tells founders: be truthful

Y Combinator chief executive Garry Tan told founders on April 27 to “be precise, and always be truthful” about revenue when talking to investors. (artificiallawyer.com) Tan published a note on X titled “Being Truthful And Precise About Revenue” and called it Y Combinator’s “official advice” on pilots, bookings, revenue and recurring revenue. (artificiallawyer.com) His point was simple: founders should not present one tier of commercial progress as if it were a stronger one. In Tan’s ordering, non-binding letters of intent sit below gross merchandise value, bookings, revenue and recurring revenue. (artificiallawyer.com) Annual recurring revenue, or ARR, is widely used in startup fundraising, but it is not a formal accounting term with one official definition. That leaves room for companies to count future contracted income differently, or to overstate what is actually live and billable now. (artificiallawyer.com 1) (artificiallawyer.com 2) The argument broke into public view last week after Spellbook chief executive Scott Stevenson said some startups were misrepresenting revenue to the market. Artificial Lawyer said the dispute centered on whether ARR was being used to describe signed future commitments instead of current recurring revenue. (artificiallawyer.com 1) (artificiallawyer.com 2) Examples from the legal technology sector show how narrow the gap can be when companies define the terms conservatively. Wordsmith told Artificial Lawyer its committed annual recurring revenue is typically 5% above ARR, while Juro said its committed figure is 2.04% higher. (artificiallawyer.com) Those companies said they exclude pilots, trials and inactive contracts from ARR, and in Wordsmith’s case do not annualize a single month of revenue to claim larger scale. Their definitions draw a line between signed commitments and revenue from contracts that have already started. (artificiallawyer.com) Tan’s warning also comes after he spent the past year highlighting unusually fast growth inside Y Combinator’s AI-heavy batches. In March 2025, he told CNBC the Winter 2025 batch was growing 10% per week in aggregate and “with actual revenue.” (cnbc.com) That makes the new message less about slowing hype than tightening definitions. When founders pitch investors in a hot market, Tan is telling them to say exactly what has been signed, what has gone live, and what is truly recurring. (artificiallawyer.com)