Burn Multiple
01 Definition
Burn Multiple meaning: A startup efficiency measure comparing cash burned to new recurring revenue added.
Burn multiple divides net cash burned in a period by the net new annual recurring revenue added in that period. A lower multiple means growth is more capital efficient. Popularized by investor David Sacks, it is mainly used to judge startup spending discipline.
Why it matters
How Burn Multiple fits the work
It shows how much cash a company spends to add each dollar of new revenue, a quick signal of how efficiently it is growing.
In context
A startup burned 2 million dollars to add 1 million dollars in new annual recurring revenue, giving a burn multiple of 2.
Practical note
The multiple swings with one time costs and lumpy revenue, so read it over several quarters. It says nothing about margins or retention.