What Is Burn Multiple?
The ratio of net burn to net new ARR — measures capital efficiency of growth.
The ratio of net burn to net new ARR — measures capital efficiency of growth.
Burn Multiple measures how much cash you burn to generate each dollar of net new ARR. It's calculated by dividing net burn (cash spent minus revenue) by net new ARR added in the same period.
A burn multiple below 1x is excellent — you're adding ARR faster than you're burning cash. Between 1-2x is good, 2-3x is concerning, and above 3x typically signals inefficient growth.
Burn multiple has become one of the most popular VC metrics because it combines growth and efficiency into a single number. It helps investors compare companies at different stages and revenue levels.
Formula
Burn Multiple = Net Burn ÷ Net New ARR
Example
If you burn $500K and add $300K in net new ARR, your burn multiple is 1.67x.
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