Burn Rate

Definitions

The rate at which a company spends its cash reserves before generating positive cash flow. Gross burn is total monthly spending; net burn subtracts revenue. Measured in 'months of runway' — how long until the money runs out.
In plain English: How fast a startup is spending its money — if you're spending $100K a month with $600K in the bank, you have 6 months before the money's gone.
Example: "Our burn rate is $400K/month and we have $2M in the bank. So we have five months to either raise or become profitable."
The phrase 'extending the runway' means reducing burn rate to make existing cash last longer — through layoffs, cutting spend, or increasing revenue. When VCs say 'default alive vs. default dead,' they're asking whether your burn rate naturally leads to profitability or requires more fundraising.
Example: 'At our current burn rate of $200K/month with $2.4M in the bank, we have 12 months of runway. We need to either raise or cut burn by Q3.'
Source: strategic context

1990s: Silicon Valley venture capitalists adopt 'burn rate' from rocketry (fuel consumption rate) to describe how fast a startup spends cash
2000: The dot-com crash makes burn rate the most feared metric — companies burning $10M/month suddenly can't raise more
2022: Rising interest rates end the zero-interest era; 'extend your runway by reducing burn' becomes the mantra again