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ARR bridge of a cloud security vendor in Bengaluru

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

A cloud security software company in Bengaluru sells worldwide and reports in USD. It starts the year with USD 40 million of ARR (annual recurring revenue). It wins USD 12 million of new ARR, existing customers add USD 8 million by protecting more cloud accounts and buying new modules, and it loses USD 2 million to churn and downgrades. It spent USD 14.4 million on sales and marketing to win the new customers, and its gross margin is 80 percent. Calculate ending ARR, growth, net and gross revenue retention, and CAC payback. (Figures are illustrative.)

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

Security SaaS health check
- ARR bridge: start + new + expansion minus churn = end
- NRR = (start + expansion minus churn) / start; GRR = (start minus churn) / start
- CAC payback = acquisition spend / (new ARR x gross margin), in months

4. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Ending ARR
What a strong candidate does: 40 plus 12 plus 8 minus 2.
Ending ARR (USD millions): 40 + 12 + 8 - 2 = 58
Step 2: ARR growth
What a strong candidate does: Increase of 18 on a start of 40.
ARR growth (percent): (58 - 40) ÷ 40 × 100 = 45
Step 3: Net revenue retention
What a strong candidate does: Existing customers only: 40 plus 8 minus 2, divided by 40.
NRR (percent): (40 + 8 - 2) ÷ 40 × 100 = 115
Step 4: Gross revenue retention
What a strong candidate does: Without expansion: 40 minus 2, divided by 40.
GRR (percent): (40 - 2) ÷ 40 × 100 = 95
Step 5: CAC payback
What a strong candidate does: New ARR of 12 brings 9.6 of gross profit a year, 0.8 a month. Spend of 14.4 is repaid in 18 months.
CAC payback (months): 14.4 ÷ (12 × 0.8) × 12 = 18

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

The company is healthy and should keep investing in selling more modules to existing customers, because it grows 45 percent with net revenue retention of 115 percent and pays back acquisition spend in 18 months. First, USD 8 million of expansion is two thirds as large as new-customer ARR, and it costs far less to win. Second, gross retention of 95 percent shows customers rarely leave, which is typical of security tools that are hard to switch off once installed. The risk is that large platform vendors bundle a similar product for free, which would slow new wins. As a next step, track which modules existing customers add, and price the most-used ones as a bundle.

Risks a strong answer names: Platform vendors may bundle a similar product into existing contracts; Rupee costs against dollar revenue move margins; A breach at the vendor itself would damage trust quickly.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.