Burn multiple, and why it replaced growth rate
Burn multiple is net burn ÷ net new ARR. It answers one question: how many dollars do you consume to manufacture a dollar of recurring revenue? David Sacks popularised it because it collapses growth and efficiency into a single figure that is hard to flatter.
The scale in common use:
- Under 1x — amazing. You add more ARR than you burn.
- 1–1.5x — great.
- 1.5–2x — good.
- 2–3x — suspect.
- Over 3x — bad. Growth is being purchased.
Runway is not the number that matters
The number that matters is runway minus the length of a raise. A raise takes most seed and Series A companies four to eight months from first conversation to cash landing. Ten months of runway is not ten months of freedom; it is four months of freedom and then a fundraise you are running out of time on. This calculator reports that date directly, because it is the one founders discover too late.
Questions
Net new ARR — does that include churn?
Yes. Net new ARR is new plus expansion, minus churned and contracted. Using gross new ARR flatters the multiple and is the most common way this metric gets misreported.
What if I have no revenue yet?
Then burn multiple is undefined and not the right metric for you. Pre-revenue, runway and the date you must start raising are the numbers to watch.
Is a low burn multiple always good?
Not necessarily. A very low multiple with very little absolute growth can mean you are under-investing. Read it alongside growth rate, not instead of it.
How long should I assume a raise takes?
Four to eight months is typical at seed and Series A, and longer in a slow market. The default here is six. If you have never raised before, assume the higher end.