Burn Multiple
Net burn divided by net new ARR, showing how efficiently a company converts cash into growth.
Definition
Burn multiple measures how much cash a company burns for each dollar of new ARR it adds. It is calculated as net burn divided by net new ARR for a period. A burn multiple of 1x means the company spends $1 to add $1 of ARR (excellent). Under 1.5x is good, 1.5-2x is acceptable, and above 2x is concerning. It is a more nuanced metric than growth rate alone because it accounts for efficiency.
Why it matters
A high burn multiple means the company is spending too much cash relative to growth. This leads to more fundraising, more dilution, and higher risk. Low burn multiples indicate an efficient business that can sustain growth with less external capital.
Example
A company burns $4M per quarter and adds $3M in net new ARR. Burn multiple = $4M / $3M = 1.33x (good). A rival burns $6M to add $2M: burn multiple = 3x (concerning, very inefficient).