Metrics & Performance
Last updated
Quick Answer
The total amount of cash a company spends each month across all operating expenses, before any revenue is subtracted.
Gross burn is the total monthly cash outflow of a business — all operating expenses including salaries, rent, software, marketing, COGS, and overhead — before accounting for any revenue coming in. It represents the raw total cost of running the company each month.
Gross burn is distinct from net burn, which subtracts revenue from total expenses to show how much cash the company is actually losing per month. Both metrics matter: gross burn shows the total cost base, while net burn shows the actual cash depletion rate.
For pre-revenue or early-revenue companies, gross burn and net burn are close to identical. As revenue grows, net burn decreases while gross burn might stay flat or increase — which is the desired direction.
In Practice
A startup has $500K in monthly expenses: $350K payroll, $75K AWS/infrastructure, $50K marketing, $25K rent and overhead. Its gross burn is $500K/month. It generates $200K in monthly revenue. Its net burn is $300K/month. Runway = cash / net burn.
Why It Matters
Investors and founders track gross burn to understand the true cost structure of the business and to stress-test scenarios. If revenue disappears, gross burn equals the rate of cash consumption. Understanding gross burn vs. net burn is essential for accurate runway calculations and fundraising timing.
VC Beast Take
Most founders confuse gross burn with net burn and accidentally paint an overly rosy picture for investors. We see decks all the time showing 18-month runways based on net burn, when the gross burn reality gives them maybe 12 months. Smart investors always dig into the gross number first—it's the unvarnished truth about your spending discipline.
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Gross burn is the total monthly cash outflow of a business — all operating expenses including salaries, rent, software, marketing, COGS, and overhead — before accounting for any revenue coming in. It represents the raw total cost of running the company each month.
Understanding Gross Burn is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Gross Burn falls under the metrics category in venture capital. This area covers concepts related to the quantitative measures used to evaluate fund and company performance.
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