Burn Multiple
A capital-efficiency metric measuring how much cash a company burns to generate each dollar of new revenue.
Burn multiple compares net cash burned over a period to the net new ARR generated in that same period, showing how efficiently a company converts spending into growth. A burn multiple of 1.0x means the company spent exactly $1 to generate $1 of new ARR; lower is more capital-efficient.
The metric became popular during and after the 2022 capital markets correction as investors shifted focus from growth-at-any-cost to capital efficiency, since a company burning heavily to generate modest new revenue is far more exposed in a tighter fundraising environment than one growing efficiently.
Burn multiple = net cash burned / net new ARR added, over the same periodA company burns $6M in net cash over a year and adds $4M of net new ARR in that same period. Burn multiple = $6M / $4M = 1.5x — spending $1.50 for every $1 of new recurring revenue.
A burn multiple under 1.5x is generally considered strong for a growth-stage company, under 1.0x is excellent, and above 2-3x invites real investor scrutiny — but always read it alongside absolute growth rate, since a very early-stage company with small ARR can show a misleadingly extreme multiple.
What's considered a good burn multiple?
Roughly below 1.5x is considered strong for a growth-stage SaaS company, though the right benchmark varies with growth rate and stage — very fast-growing early companies are typically given more room for a higher multiple.
Related terms
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