Scott Stevenson, CEO of legal AI firm Spellbook, has publicly criticized the practice of inflating annual recurring revenue (ARR) figures among AI startups. In an April 2026 post on X, Stevenson highlighted the discrepancy between "Contracted ARR" and actual revenue, noting instances where reported ARR was up to five times higher than real collections. He claims investors are aware of this gap, which he describes as potentially misleading. Spellbook distinguishes itself by reporting only "Live Annual Run Rate," based on active, invoiced contracts. This transparency has supported its financial growth, including a $50 million Series B round in 2025 and $40 million in venture debt in 2026. The company aims for $100 million ARR in 2026, serving 4,000 customers globally. Other industry leaders, including Clio CEO Jack Newton and Y Combinator's Garry Tan, have also raised concerns about revenue reporting practices in the AI sector.