Metrics & Performance
Net Burn
Last updated
Quick Answer
The actual monthly cash loss after subtracting revenue from total operating expenses — the real rate at which a company is depleting its cash reserves.
Net Burn Rate (monthly)
Net Burn = Total Expenses - Total Revenue
Where
- Total Expenses
- = All monthly operating expenses
- Total Revenue
- = All monthly revenue
What it is
Net burn (also called net cash burn) is the actual monthly cash outflow after revenue is credited: Net Burn = Gross Burn − Revenue. It represents the true rate at which a startup is consuming its cash reserves and is the correct figure to use when calculating runway.
A company with $500K gross burn and $200K in monthly revenue has $300K net burn — it's depleting its cash at $300K/month. At that rate, $3M in the bank provides 10 months of runway.
Net burn can turn negative (become net cash positive) when revenue exceeds all operating expenses — at which point the company has reached cash flow breakeven. This is a major milestone for venture-backed companies because it eliminates existential fundraising risk.
In Practice
Company has $600K gross burn and $400K monthly revenue. Net burn = $200K/month. With $2.4M in the bank, it has 12 months of runway. If revenue grows to $600K/month with costs flat, net burn hits zero — the company is cash flow neutral and no longer dependent on raising to survive.
Operational context
What good looks like
The term is tied to a real workflow, not just a definition.
Ownership, timing, and evidence are clear.
The reader can tell what decision the concept supports.
Related terms point to the next useful explanation.
Why It Matters
Net burn is the most important day-to-day financial metric for a startup because it determines how long the company can survive without raising more capital. Investors scrutinize net burn trajectory — declining net burn (as revenue grows) signals improving unit economics and reduces fundraising pressure.
VC Beast Take
Too many founders obsess over gross burn while ignoring the revenue side of the equation. Net burn tells the real survival story, but it can mask underlying problems—like artificially low burn from cutting essential R&D, or unsustainable revenue from one-time contracts. The best operators track both metrics religiously and can defend every dollar of burn with a clear ROI story. Investors can smell manufactured burn improvements from a mile away.
Term Family
Related concepts
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Solo GP Venture Capital: How to Run a One-Person VC Fund
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Related Questions
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Frequently Asked Questions
What is Net Burn in venture capital?
Net burn (also called net cash burn) is the actual monthly cash outflow after revenue is credited: Net Burn = Gross Burn − Revenue. It represents the true rate at which a startup is consuming its cash reserves and is the correct figure to use when calculating runway.
Why is Net Burn important for startups?
Understanding Net 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 Net Burn fall under in VC?
Net 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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