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How to Calculate Burn Multiple
Burn Multiple measures how much cash you burn for every dollar of ARR added.
Net Burn / Net New ARR
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Expert FAQ
What is an 'Efficient' Burn Multiple?
Anything under 1.0 is exceptional; 1.5 to 2.0 is considered efficient for early-stage startups.
Who popularized this metric?
David Sacks of Craft Ventures popularized it as a measure of capital efficiency.
High Growth vs High Burn?
A high multiple is okay if you are early and building, but dangerous if growth is slowing.
Does it include R&D spend?
Yes, it uses Net Burn (total spend minus revenue), so it includes all company costs.
Relationship to HVC?
High-Value-Customer growth lowers your multiple by adding more revenue per dollar burned.
