Metrics & Performance
Burn Rate
Also Known As
Monthly BurnCash Burn
Burn rate is the rate at which a startup spends cash, typically measured monthly. Gross burn is total spending; net burn is spending minus revenue.
What is Burn Rate?
Burn rate measures how fast a startup is spending money. It's called "burn" because early-stage startups typically lose money (burning cash) before becoming profitable.
Types of Burn Rate
Gross Burn:
- Total monthly operating expenses
- All money going out
Net Burn:
- Gross burn minus revenue
- Actual cash decrease per month
Burn Rate Example
| Item | Amount |
|---|---|
| Salaries | $80,000 |
| Rent | $5,000 |
| Software | $3,000 |
| Marketing | $10,000 |
| Other | $2,000 |
| Gross Burn | $100,000 |
| Revenue | -$30,000 |
| Net Burn | $70,000 |
Managing Burn
- Default Alive: Can you become profitable before running out of money?
- Burn Multiple: Net burn / net new ARR (lower is better)
- Efficient Growth: Balance speed vs sustainability
Burn Rate Philosophy
- High Burn: Aggressive growth, need to raise often
- Low Burn: Slower growth, more runway
- Right Burn: Appropriate for your stage and metrics
Example Usage
“Their monthly burn rate of $150K gave them 16 months of runway.”