Metrics & Performance
Gross Burn
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.
Related Concepts
Further Reading
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How to write LP quarterly reports that build trust and keep your investors informed. Templates, metrics to include, and the cadence top GPs follow.
How to Write an Investment Memo: The VC Template That Actually Works
A practical, partner-ready guide to writing VC investment memos that actually drive decisions: structure, examples, common mistakes, and how top firms like Sequoia, a16z, and Benchmark do it.
How to Calculate Burn Rate: Formula, Examples, and What VCs Look For
Burn rate tells you how fast your startup is spending cash. Learn the exact formula, see a worked example, and find out what VCs expect at every stage.
How to Evaluate a Startup as an Angel Investor
A practical framework for assessing pre-seed and seed startups — covering team, market, traction, business model, and terms. Plus the red flags that experienced angels never ignore.
How to Prepare a Financial Model That VCs Take Seriously
A strong startup financial model can make or break your fundraise. Learn exactly what VCs expect — from unit economics to scenario planning — and how to build one that earns credibility.
Venture Studio Model: How It Works and When It Makes Sense
Venture studios build companies from scratch instead of funding them. Here's how the model works, how the economics stack up, and when it outperforms traditional VC.
Comparisons
Frequently Asked Questions
What is Gross Burn in venture capital?
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.
Why is Gross Burn important for startups?
Understanding Gross Burn is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does Gross Burn fall under in VC?
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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