Glossary · Fundraising
Burn Rate
Burn rate is the monthly amount of cash a startup consumes before it becomes profitable.
Burn rate is the monthly amount of cash a startup consumes before it becomes profitable.
Definition
Formula
Net Burn = Monthly Cash Out − Monthly Cash In
Worked example
A startup with $80k/mo expenses and $30k/mo revenue has a net burn of $50k/mo. With $600k in the bank, its runway is 12 months.
Common mistakes
- — Only tracking gross burn — ignoring revenue paints an artificially scary picture.
- — Not modeling burn scenarios for the next 6/12/18 months against hiring plans.
Frequently asked questions
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