Burn Rate

Burn rate is how fast your startup is spending money — specifically, how much cash goes out the door each month beyond what comes in. There are two types: gross burn and net burn. Gross burn is your total monthly spending, regardless of revenue. Net burn is your total monthly spending minus your revenue — the actual cash you're losing each month.

For most investor and operational conversations, net burn is the more relevant number. If you spend $80,000/month on salaries, rent, software, and marketing, and bring in $30,000/month in revenue, your gross burn is $80K and your net burn is $50K. You're consuming $50K more than you're making each month.

Burn rate is the foundation for calculating runway (how many months of cash you have left) and is a key factor in fundraising timing decisions. It's also a management discipline metric — are you spending efficiently? A startup with $100K/month net burn that's growing revenue at 20% month-over-month is in a very different position than one with the same burn but flat revenue. Context matters: the burn itself isn't good or bad; what matters is what you're getting for it.

Your burn rate is quite literally a countdown clock on your company's survival. If you have $600K in the bank and a $50K monthly net burn, you have 12 months to either reach profitability, raise more money, or shut down. Knowing your burn rate — and tracking it weekly, not just monthly — lets you make proactive decisions about spending, hiring, and fundraising timing. The most common startup death is running out of cash, and it almost always comes from founders who weren't tracking or managing their burn rate carefully enough.