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Burn Multiple

What is a Burn Multiple?

Your burn multiple is your net cash burned divided by your net new ARR in a given period. It’s a measure of capital efficiency, and you’d like to keep it as low as possible.

Note that this metric assumes that you’re a SaaS business, but the general principle is applicable for any high-growth company. The term was first coined in a post by David Sacks, where he provides the following rules of thumb about acceptable burn rates for venture-scale startups:

Burn Multiple Efficiency
Under 1x Amazing
1 - 1.5x Great
1.5 - 2x Good
2 - 3x Suspect
Over 3x Bad

You can read his full post here. (It’s both short and good.)

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