## 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