Burn Multiple Calculator
Measure your startup's capital efficiency by comparing cash burn against net new ARR.
Educational Purpose Disclaimer
This calculator is provided for informational and educational estimation purposes only. All calculations and projections are based on standard mathematical formulas and assumed inputs. The output values should not be considered professional financial, legal, tax, or medical advice. ProCalc is not a registered financial advisor or licensed practitioner. Always consult a qualified professional (such as a Chartered Accountant, certified planner, or physician) before making major decisions.
What is the Burn Multiple Calculator?
The Burn Multiple Calculator is a capital efficiency tool built for startup founders, CFOs, and venture investors. Popularized by venture capitalist David Sacks, the Burn Multiple measures how much cash a startup burns to add $1 of Net New Annual Recurring Revenue (ARR). It evaluates your company's growth efficiency, highlighting whether you are scaling sustainably or burning cash inefficiently.
How Does the Burn Multiple Calculator Work?
1. Enter Net Burn — Total cash spent over a given period (excluding revenue cash inflows).
2. Provide Net New ARR — The total amount of new annual recurring subscriptions added over the same period.
3. Get Efficiency Score — Review your Burn Multiple and see where your startup sits on standard venture benchmarks.
Formula & Calculation Method
Burn Multiple Equation:
- Burn Multiple = Net Cash Burn / Net New ARR
Venture Capital Efficiency Benchmarks:
- Under 1.0x: Amazing / Best-in-Class (Adding more ARR than you are burning).
- 1.0x to 1.4x: Good (Healthy, efficient growth).
- 1.5x to 2.0x: Suspicious / Normal (Acceptable for seed stages, but needs optimization).
- Over 2.0x: Bad / Inefficient (Burning too much cash relative to sales additions).
Example Calculation
Example: Startup burns $50,000 in cash over a quarter, adding $40,000 in new ARR.
- Burn Multiple: $50,000 / $40,000 = 1.25x
- Grade: Good Efficiency (The company spent $1.25 to buy $1.00 of recurring revenue).
Frequently Asked Questions
**Burn Multiple Equation:** - Burn Multiple = Net Cash Burn / Net New ARR **Venture Capital Efficiency Benchmarks:** - **Under 1.0x:** **Amazing / Best-in-Class** (Adding more ARR than you are burning). - **1.0x to 1.4x:** **Good** (Healthy, efficient growth). - **1.5x to 2.0x:** **Suspicious / Normal** (Acceptable for seed stages, but needs optimization). - **Over 2.0x:** **Bad / Inefficient** (Burning too much cash relative to sales additions).
Disclaimer: This tool is provided for informational and calculation purposes. Output values are estimates based on standard user inputs.