Formula
Burn Multiple = Net Burn / Net New ARR
Interactive Widget
Chart
About Burn Multiple Calculator
Burn Multiple measures capital efficiency by comparing how much cash a business burns to generate each dollar of net new Annual Recurring Revenue. It answers a direct question: for every dollar of new recurring revenue added, how many dollars did it cost in net cash burn?
Unlike growth rate alone, Burn Multiple penalizes growth that is bought expensively. A company growing 100% year-over-year while burning cash inefficiently can have a worse Burn Multiple than a company growing more slowly but far more efficiently — making this metric a favorite of later-stage investors evaluating capital efficiency.
Benchmarks
A Burn Multiple of 1x or below is considered excellent — the business generates at least a dollar of net new ARR for every dollar burned. 1x to 2x is good and typical for healthy growth-stage SaaS. 2x to 3x is considered suspect and worth investigating. Above 3x is generally considered inefficient and a red flag for investors.
Burn Multiple tends to be noisier at very early stages, where net new ARR is small relative to fixed costs like initial team hires — a single large deal or a slow month can swing the number significantly. It becomes more meaningful once a company has meaningful recurring revenue to smooth out the denominator.
Frequently Asked Questions
What is a good Burn Multiple for a SaaS startup?
1x or below is excellent. 1x to 2x is good and typical for healthy growth-stage SaaS. 2x to 3x is considered suspect and worth investigating further. Above 3x is generally seen as inefficient capital deployment.
How is Burn Multiple different from CAC?
CAC measures the cost to acquire one customer through sales and marketing spend specifically. Burn Multiple is broader — it compares total net cash burn (including R&D, G&A, and all operating costs, not just acquisition) to net new ARR, giving a full picture of capital efficiency across the whole business.
Why does Burn Multiple matter more at later funding stages?
Early-stage investors often prioritize growth rate above all else, tolerating high burn to prove market fit. Later-stage investors increasingly weight capital efficiency, since a startup burning cash inefficiently at scale requires disproportionately more capital to keep growing — Burn Multiple is one of the clearest single signals of that efficiency.
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