Burn rate
How much cash a startup spends each month above what it earns. Net burn = expenses − revenue.
Burn rate is the rate at which a company is consuming cash. Two common versions:
- Gross burn: total monthly expenses. Useful for understanding the cost structure.
- Net burn: monthly expenses minus monthly revenue. The rate you're actually depleting the bank account.
For a pre-revenue startup, gross and net burn are the same number. For a revenue-generating startup, net burn is what matters — it tells you how long the money lasts.
If a startup has $1.2M in the bank and a net burn of $100k/month, it has 12 months of runway. The closer that number gets to single digits, the more urgent fundraising or revenue acceleration becomes.
Burn rate isn't inherently good or bad — it's a function of strategy. Aggressive burn during a clear growth window can be the right move; same burn at a stagnant company is panic-mode. The question is always: what is the burn buying, and is it producing returns that exceed the rate?
For founders, the cleanest discipline is to track burn monthly, compare against runway, and treat the trend as the signal. Rising burn with rising revenue is fine. Rising burn with flat revenue is the conversation.
See also
- Runway — How many months a company can keep operating at its current burn rate before running out of cash. Cash ÷ monthly net burn.
- Unit economics — The revenue and costs associated with one customer (or one transaction). The fundamental health check for whether scaling makes the business better or worse.
- Gross margin — Revenue minus the direct cost of delivering that revenue, divided by revenue. The percentage of each dollar of revenue you keep before operating expenses.
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