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The burn multiple measures how efficiently a startup converts cash burn into revenue growth. Learn how to calculate it, what good looks like, and how to improve your capital efficiency as you scale.
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For early-stage founders, growth often overshadows efficiency.
But investors and boards care about how effectively each dollar of burn drives new revenue — not just top-line momentum.
That’s where the Burn Multiple comes in.
It’s the ultimate measure of capital efficiency — your ability to grow sustainably without burning through cash.
Definition:
Burn Multiple = Net Burn / Net New ARR
Interpretation:
The lower the number, the more efficiently you’re converting capital into growth.
Ideal Range:
2.5 = Inefficient
Recommended Tool: Runway Calculator
Coined by David Sacks (Craft Ventures), the Burn Multiple expresses how much cash you spend for each dollar of new recurring revenue.
It helps investors gauge whether growth is being achieved efficiently — or at unsustainable cost.
It’s simple but powerful:
[Burn Multiple](/glossary#burn-multiple) = Net Burn / Net New [ARR](/glossary#arr-annual-recurring-revenue)
Example:
If your company burns $1.5M in a quarter and adds $1M in new ARR, your Burn Multiple = 1.5.
That means you spent $1.50 for every new dollar of ARR added.
During bull markets, growth hides inefficiency.
In tighter markets, efficiency determines survival.
Burn Multiple tells you:
Investors now use Burn Multiple as a leading indicator of business quality — alongside NRR and payback period.
Net Burn = Cash Outflows – Cash Inflows (excluding financing)
Example:
If you spent $2.2M in total and brought in $700k in cash receipts:
Net Burn = 2.2M – 0.7M = 1.5M
Net New ARR = Current ARR – Prior ARR
Example:
If you ended the quarter at $6.5M ARR, up from $5.5M last quarter:
Net New [ARR](/glossary#arr-annual-recurring-revenue) = 6.5M – 5.5M = 1.0M
[Burn Multiple](/glossary#burn-multiple) = 1.5M / 1.0M = 1.5
| Stage | Great | Good | Risky | Poor |
|---|---|---|---|---|
| Seed / Pre-A | <1.5 | 1.5–2.5 | 2.5–3.0 | >3.0 |
| Series A | <1.2 | 1.2–2.0 | 2.0–2.5 | >2.5 |
| Series B | <1.0 | 1.0–1.5 | 1.5–2.0 | >2.0 |
| Growth / Series C+ | <0.8 | 0.8–1.2 | 1.2–1.5 | >1.5 |
The rule of thumb:
The lower your burn multiple, the better your cash efficiency.
Elite SaaS companies often sustain burn multiples below 1.0.
It signals that your growth is self-reinforcing rather than capital-dependent.
VCs and growth investors track burn multiples to:
In 2021, “growth at all costs” dominated.
In 2025, “efficient growth” is the new mantra.
| Metric | Focus | Strength |
|---|---|---|
| Burn Multiple | Growth efficiency | Simple, holistic |
| Magic Number | Sales efficiency | Short-term revenue response |
| Payback Period | CAC recovery | Cashflow insight |
| Rule of 40 | Balance of growth & profitability | High-level health |
Each serves a purpose — but Burn Multiple remains the clearest all-in efficiency score for scale-ups.
Tighten GTM efficiency.
Prioritise retention and expansion.
Extend runway.
Align incentives to efficiency.
Forecast deliberately.
Remember: efficiency is contextual — Series A SaaS should burn differently than a capital-light B2B services firm.
| Company Type | Typical Burn Multiple |
|---|---|
| SaaS (PLG) | 0.8–1.3 |
| SaaS (Sales-led) | 1.2–1.8 |
| Marketplaces | 1.5–2.0 |
| Hardware / Deep Tech | 2.0–3.0 |
Benchmarks evolve with market conditions.
When capital tightens, efficiency expectations rise.
Your burn multiple is a reflection of discipline — not austerity.
The goal isn’t to stop investing.
It’s to invest wisely, where each dollar compounds rather than disappears.
As a founder, tracking your burn multiple monthly helps you:
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