Burn Multiple

Definitions

1. A capital efficiency metric calculated as net burn divided by net new ARR. A burn multiple of 1x means you spend $1 to generate $1 of new ARR (excellent). Above 2x is concerning, and above 3x suggests unsustainable growth. Became the key metric in the post-2022 funding environment.

   In plain English: How many dollars you burn to generate each dollar of new annual revenue — lower is better.

   Example: "We burned $3M last quarter and added $1.5M in new ARR — a 2x burn multiple. Investors want to see us get to 1.5x before Series B."

Related Terms

• Unit Economics
• Compound Growth
• Internal Rate of Return
• Leverage
• Magic Number Startup
• Basis Point
• Rule of 40
• Run Rate
• SaaS Metric