Burn Multiple (Startups)
Short answer
Burn multiple measures how much cash a startup burns to generate $1 of new annual recurring revenue (ARR).
Formula
Burn Multiple = Net Cash Burned / Net New ARR
Take net cash burned in the period. Divide by net new annual recurring revenue added in the same period.
Why it matters
Burn multiple is the cleanest startup efficiency metric. Coined by David Sacks. A burn multiple of 1× means $1 burned for every $1 of new ARR added. Below 1× is excellent. Above 3× and the business is probably not capital-efficient.
Benchmarks
People also ask
Common questions about Burn Multiple (Startups)
What is Burn Multiple (Startups)?+
Burn multiple measures how much cash a startup burns to generate $1 of new annual recurring revenue (ARR).
How is Burn Multiple (Startups) calculated?+
Take net cash burned in the period. Divide by net new annual recurring revenue added in the same period.
What is a good Burn Multiple (Startups)?+
A healthy burn multiple (startups) is typically around < 1.0× — amazing. Specific targets vary by industry and stage; check our benchmarks above for your sector.
Why does Burn Multiple (Startups) matter?+
Burn multiple is the cleanest startup efficiency metric. Coined by David Sacks.
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Related concepts
Where this matters most
See Burn Multiple (Startups) in the context of saas & software.
Industry-specific benchmarks, common pitfalls, and what lenders look for in this sector.