"It's likely safe to say-creative accounting's been around for as long as accounting itself. In 1494, for example, mathematician and 'father of modern accounting' Luca Pacioli wrote of Venetian merchants willfully rendering their ledgers illegible. In the Gilded Age, inflating assets and understating liabilities was standard practice across a booming system. And who can forget the "channel stuffing" of the 2000s?"
""The problem is that so much of this is essentially vibe revenue," one VC told me. "It's not Google signing a data center contract. That's real shit. Some startup that's using your product temporarily? That's really not revenue." ARR was a favorite metric of VCs throughout the software-as-a-service (SaaS) era, widely accepted as a trusted proxy for a stable and growing startup."
Creative accounting has existed throughout history, from Luca Pacioli noting illegible ledgers in 1494 to Gilded Age asset inflation and 2000s channel stuffing. Current creative accounting centers on ARR (annual recurring revenue) being misapplied to AI businesses. VCs warn that founders count pilots, one-time deals, or unactivated contracts as recurring revenue, producing "vibe revenue" rather than durable contracts. Competitive pressure to scale quickly drives some of this behavior. Metrics will need to evolve to reflect how AI companies actually operate. Misusing ARR remains unhealthy and risky for the broader system.
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