Burn Rate
How much cash a company spends per month beyond what it earns.
Definition
Burn rate is the speed at which a company is spending its cash reserves, typically measured monthly. Gross burn is total monthly spending; net burn subtracts revenue. A company with $500K in monthly expenses and $200K in monthly revenue has a net burn of $300K/month. It is the single most important metric for understanding how long a startup can survive.
Why it matters
High burn rate with low runway means your company may need to raise more money soon (potentially diluting your equity) or cut costs (potentially through layoffs). Knowing the burn rate helps you gauge job security.
Example
Your company spends $800K/month on salaries, rent, and cloud costs, and brings in $300K/month in revenue. The net burn rate is $500K/month. With $6M in the bank, that is 12 months of runway.