Also known as: monthly burn, cash burn

Burn Rate

FoundationalFinanceMetrics

Definition

Burn Rate: Burn rate is the speed at which a company spends its cash reserves before generating positive cash flow. Gross burn is total monthly expenses, while net burn subtracts any revenue. Understanding burn rate is critical for startups to calculate runway and plan fundraising timelines.

Example Usage

“With a net burn rate of $80K/month and $960K in the bank, we have 12 months of runway.”

Common Misconceptions

Lower burn is always better. Sometimes you need to burn faster to capture market opportunity.

Burn rate is fixed. It can vary significantly month to month based on hiring and expenses.

Burn rate only matters for VC-backed companies. Bootstrapped companies must manage it too.

Related Terms

Runway

Runway is the amount of time a startup can continue operating before running out of money, assuming current burn rate remains constant. It's calculate...

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