Burn Multiple Calculator
Free Burn Multiple Calculator: Measure Your Startup's Growth Efficiency
Burn Multiple measures the amount a startup is spending to generate each incremental dollar of annual recurring revenue (ARR). Popularized by David Sacks, this metric is an evolution of Bessemer Venture Partners' Efficiency Score and has become essential for evaluating startup capital efficiency in today's funding environment.
Frequently Asked Questions (FAQs)
What's a good burn multiple for early-stage startups?
Early-stage startups typically see higher burn multiples (3-5) as they invest heavily in product development and market validation. As companies mature, burn multiples should decrease below 2x.
How often should I calculate burn multiple?
Calculate burn multiple monthly or quarterly to track trends and make timely adjustments to your growth strategy.
Can burn multiple be negative?
Yes, if your ARR decreases (negative net new ARR), your burn multiple will be negative, indicating serious business challenges.
How does burn multiple relate to the Rule of 40?
Both metrics measure efficiency, but burn multiple focuses on capital efficiency while Rule of 40 combines growth rate and profitability margins.