Burn rate is the rate at which a startup spends its cash reserves each month. It is one of the key indicators investors use to assess a company's financial health and to understand how much time remains before the company needs additional capital.

There are two common ways to measure burn rate. Gross burn is total monthly cash expenditure across all operating expenses — payroll, software, marketing, hosting, contractor costs, office, everything. Net burn is gross burn minus any cash revenue collected in the period — it represents the actual monthly reduction in cash balance. Founders should report net burn when discussing runway, but understand gross burn when modeling worst-case scenarios where revenue may not materialize as expected.

For example, a company spending $150,000/month with $30,000 in monthly revenue has a gross burn of $150,000 and a net burn of $120,000. If revenue grew to $90,000/month while gross expenses stayed flat, net burn would drop to $60,000 — extending the company's runway without raising additional capital. This is the dynamic that makes early revenue more valuable than founders sometimes realize.

Burn rate directly determines a company's runway. A company with $1.2M in the bank and a net burn of $100,000/month has 12 months of runway. Investors expect founders to know their burn rate precisely and to have a clear plan for how the raise being requested extends runway to a meaningful milestone — typically 18–24 months of post-raise runway anchored to a specific revenue or product target.

Industry benchmarks vary widely by stage and business model. A seed-stage B2B SaaS company often burns $80K–$200K/month at a team size of 5–10. A capital-intensive deeptech or biotech company can burn $300K–$1M/month at the same stage due to research, lab, or clinical costs. Investors expect burn to scale predictably with team size, and they expect a clear story for what each dollar of burn is buying.

High burn without corresponding growth is one of the most frequent reasons rounds stall or get marked down. A company spending $400K/month with flat MRR has different investability than a company spending $400K/month with 20% MoM MRR growth — even though the burn looks identical. Capital efficiency (the burn multiple: net burn divided by net new ARR) is increasingly cited by investors as a primary diligence metric, with best-in-class SaaS companies running burn multiples under 1.0x at seed and under 1.5x through Series A.