Metrics & Performance
Burn Multiple
Net burn divided by net new ARR — a measure of how efficiently a company is converting cash spending into revenue growth. The lower the burn multiple, the more capital-efficient the growth.
The Burn Multiple is a capital efficiency metric that measures how much cash a company burns for every dollar of net new ARR it generates. It was popularized by Bessemer Venture Partners as a framework for evaluating startup growth efficiency.
Burn Multiple = Net Burn / Net New ARR
A burn multiple of 1x means the company burns $1 to generate $1 in new ARR — reasonable but not great. Below 1x is excellent. Above 2x is concerning; above 3x is a red flag.
Burn multiple is especially useful during capital efficiency conversations because it normalizes burn relative to growth output, unlike looking at burn in isolation.
In Practice
A startup has $300K monthly net burn and generates $150K in net new MRR ($1.8M annualized net new ARR / 12 = $150K MRR). Net new ARR for the month: $150K × 12 = $1.8M annualized, or on a monthly basis, $150K new MRR × 12 = $1.8M new ARR annually. Monthly burn multiple = $300K / $150K = 2x. Over a quarter: if net burn is $900K and net new ARR is $600K, burn multiple is 1.5x — acceptable for early growth stage.
Why It Matters
Burn multiple directly answers the most important growth-stage question: are we growing efficiently? During the 2021 bull market, burn multiples of 3-4x were common and tolerated. The post-2022 market reset made burn multiple a gating criterion for funding — investors now expect sub-1.5x for Series B companies and improving burn multiples as a sign of operational discipline.
VC Beast Take
Burn multiple should improve over time as revenue grows faster than spending. A company that improves burn multiple from 3x to 1.5x while maintaining growth rate is demonstrating exactly the kind of operational leverage investors want to see. A company that maintains a 3x burn multiple for three consecutive years is proving it can only grow by spending — a fundamentally weaker business model.