Burn Rate
Burn rate is the net cash a company consumes each month, calculated as total expenses minus total revenue. Divide your cash balance by monthly burn rate to get runway in months. Start fundraising with at least 9 to 12 months of runway remaining.
Why Burn Rate Matters
Burn rate is a survival metric. A startup with $1M in the bank and $100K monthly burn has 10 months of runway. Start fundraising at 6 months of runway remaining, and you have 4 months to close — which is tight. Understanding burn rate lets you make proactive decisions about spending, hiring, and fundraising timing. It also reveals operational efficiency: two companies with the same revenue but different burn rates have fundamentally different risk profiles.
How to Calculate Burn Rate
Subtract total monthly revenue from total monthly expenses. Alternatively, measure the decrease in cash balance month over month. Gross burn is total expenses; net burn is expenses minus revenue.
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Industry Benchmarks
| Segment | Good | Average | Poor |
|---|---|---|---|
| Pre-revenue startup | <$50K/mo | $50K–$150K/mo | >$150K/mo |
| Seed-stage | <$80K/mo | $80K–$200K/mo | >$200K/mo |
| Series A | <$200K/mo | $200K–$500K/mo | >$500K/mo |
| Series B+ | <$500K/mo | $500K–$1.5M/mo | >$1.5M/mo |
Expert Tips
Always track net burn (expenses minus revenue), not gross burn (total expenses). Net burn tells you the real cash consumption rate.
Plan fundraising when you have 9-12 months of runway remaining. Fundraising typically takes 3-6 months, and you don't want to negotiate from a position of desperation.
Break burn rate into fixed costs (rent, salaries) and variable costs (marketing, hosting). You can quickly reduce variable costs but fixed costs take longer to adjust.
A good rule of thumb: your annual burn should not exceed the amount you last raised. Burning $3M/year on a $2M raise means you'll be fundraising again in 8 months.
Frequently Asked Questions
What is burn rate?
What is the difference between gross and net burn?
How do I calculate runway from burn rate?
What is a healthy burn rate for a startup?
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Business Models Using Burn Rate
Burn Rate is a key metric for these business types. Click any model to see how Revenue Map calculates it automatically.
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