What is burn multiple?

By Paulo de VriesLast verified 2026-05-294 sources~3 min readhigh consensus

Quick answer

Burn multiple is net cash burned divided by net new ARR added in a period — how much you spend to add one dollar of recurring revenue. Formula: net burn ÷ net new ARR. Coined by David Sacks and tracked by Bessemer. Under 1× is amazing, 1–1.5× great, over 3× bad. It is the cleanest single measure of growth efficiency.

4 variables shift this number4 cited sources4 common mistakes addressed~3 min read read below

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The full answer

The formula

`` Burn Multiple = Net burn / Net new ARR ``

Both over the same period (usually a quarter or year). It answers one question: for every dollar of new recurring revenue you added, how many dollars of cash did you burn to get it?

The benchmark scale (Sacks / Bessemer)

Burn Multiple	Rating
< 1×	Amazing
1 – 1.5×	Great
1.5 – 2×	Good
2 – 3×	Suspect
> 3×	Bad — burning a lot to grow a little

A 1× burn multiple means you burned $1 to add $1 of new ARR; 3× means $3 for the same dollar — a signal that acquisition or retention is leaking.

Why it beats raw growth rate

Growth rate alone rewards "growth at any cost" — a company can post 200% growth while burning unsustainably. Burn multiple normalizes growth by its cash cost, exposing whether growth is *efficient*. Two companies growing ARR equally fast can have wildly different burn multiples; the lower one is building a more durable business.

Worked example

A startup burns $4M net in a year and adds $2M of net new ARR → burn multiple = 2.0× (suspect). If it tightens spend and the next year burns $3M to add $3M ARR → 1.0× (great). Same company, much healthier trajectory — visible in one number.

How it sits with the other cash metrics

Burn rate = speed of spend (per month)
Runway = cash ÷ net burn (months left)
Burn multiple = net burn ÷ net new ARR (efficiency of growth)
Rule of 40 = growth % + profit margin % ≥ 40 (balance of growth and profitability)

Burn rate and runway tell you *how long you last*; burn multiple tells you *how well you convert cash into recurring revenue*. Investors increasingly lead with burn multiple because it is hard to game.

When it misleads

Lumpy enterprise deals distort a single quarter (one large contract can flatter the multiple; a slow quarter punishes it). Read it as a trailing-twelve-month figure, and pair it with net revenue retention to separate new-logo efficiency from expansion.

Cross-reference: see /pages/what-is/burn-rate + /pages/what-is/runway + /pages/what-is/annual-recurring-revenue.

Time ranges by condition

Condition	Duration	Note
Formula	Net burn / Net new ARR	—
Amazing	< 1×	—
Great	1 – 1.5×	—
Suspect	2 – 3×	—
Bad	> 3× (lots of cash for little ARR)	—

What changes the time

Net new ARR quality. Expansion ARR is cheaper than new-logo ARR; a low burn multiple driven by expansion is healthier
Deal lumpiness. One large enterprise deal can flatter (or a slow quarter punish) a single period — use trailing-twelve-month
Spend discipline. Cutting inefficient S&M lowers net burn without proportionally lowering net new ARR → multiple improves
Retention. High churn shrinks NET new ARR (gross new − churned), inflating the multiple even at constant spend

Common questions

How do I calculate burn multiple?

Divide net cash burned by net new ARR over the same period: Burn Multiple = Net burn ÷ Net new ARR. If you burned $4M and added $2M of net new ARR in a year, the multiple is 2.0×. "Net new ARR" is gross new ARR minus churned ARR, so high churn inflates the multiple even if spend is constant.

What is a good burn multiple?

On the Sacks/Bessemer scale: under 1× is amazing, 1–1.5× is great, 1.5–2× is good, 2–3× is suspect, and over 3× is bad. The number is how many dollars of cash you burn to add one dollar of recurring revenue, so lower is better. Read it trailing-twelve-month to smooth out lumpy enterprise deals.

Why is burn multiple better than growth rate?

Growth rate alone rewards growth at any cost — a company can grow 200% while burning unsustainably. Burn multiple normalizes growth by its cash cost, revealing whether the growth is efficient. Two companies growing ARR at the same rate can have very different burn multiples; the lower one converts cash into recurring revenue more efficiently and is building a more durable business.

How does burn multiple relate to burn rate and runway?

Burn rate is the speed you spend cash per month; runway is cash ÷ net burn (months of life left); burn multiple is net burn ÷ net new ARR (the efficiency of turning cash into recurring revenue). Burn rate and runway tell you how long you survive; burn multiple tells you how well you grow. Investors increasingly lead with burn multiple because it is hard to game.

Sources

We cite primary research, expert practice, and authoritative reference. Higher-tier sources weighted heavier. See methodology.

Tier 1 · peer-reviewed / governmentalTier 2 · editorial referenceTier 3 · named practitioner

T2David Sacks, "The Burn Multiple" — Origin + canonical benchmark scale for the metric
T1Bessemer Venture Partners "State of the Cloud" — Burn-multiple benchmarks across public + private SaaS
T2Andreessen Horowitz, "16 Startup Metrics" — Capital-efficiency metrics in the SaaS canon
T1Aswath Damodaran, NYU Stern — Cash-efficiency + growth-vs-profitability frameworks

Verify this answerEvery number, range, and recommendation on this page traces to a cited source listed above. Click any source to read the original. See how we verify for the full source-tier discipline, or browse the citation graph to see every source we cite across 264 answers.

What could change this answer

honest uncertainty

We don’t know your specific equipment, ingredient batch, or environment. This answer is the best directional estimate from cited sources. Here’s where it’s less certain:

4 factors shift the answer. Your specific net new arr quality, deal lumpiness, spend discipline (and more) can move this estimate in either direction. The table below shows the documented ranges.
Range spans 5 documented conditions. Pick the row that matches your scenario; halfway between two rows is your best estimate. The widest condition you can imagine is the safer upper bound.
Treat as a directional starting point. Real-world equipment, ingredient batch, and ambient conditions cause natural variance the table cannot capture. Use sensory checks (sight, smell, touch, internal temperature when relevant) alongside this answer — not instead of it.
Backed by 4 cited sources — verify if precision matters. See the Sources section for primary references. Cross-check the cited materials when stakes are high: commercial production, food safety, allergens, dietary or medical considerations.
Verified today. If you found a better-sourced answer or our answer no longer matches reality, tell us — corrections are public and dated. The page exists to be accurate, not to be unchanged.

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de Vries, P. (2026). What is burn multiple?. AskedWell. Retrieved 2026-05-29, from https://askedwell.com/pages/what-is/burn-multiple

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Last verified: 2026-05-29 · Published 2026-05-29

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