Burn Multiple Explained: The Formula, the Bands, and How to Improve It
Collated by Harry Prabandham
Curated by Rubric Financial
Last updated
1 / 5
The Formula
- Burn multiple = net burn / net new ARR. Net burn is your cash burn (the negative of cash flow from operations); net new ARR is new plus expansion ARR minus churned ARR.
- Burn $1M in a quarter and add $800K of net new ARR: burn multiple is 1.25x. Burn $1M and add $200K: it is 5x.
- The interpretation is simple: how much capital you consume to produce one dollar of recurring revenue.
- Introduced by David Sacks in 2020, it has hardened into a gating metric: most Series A and B investors will not seriously engage above 2x the stage benchmark.
Go deeper on this topic: Burn Multiple Benchmarks by Stage 2026: Pre-Seed Through Series C→
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About the author
Harry PrabandhamFounder & CEO
Founder and CEO of StartupCFO. MBA from Wharton, MS in Computer Science, and decades of experience building and advising venture-backed startups.
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