Also called: Net burn multiple
TL;DR
Net new ARR divided by net burn, the dollars of capital consumed per dollar of new ARR generated.
The burn multiple, popularized by David Sacks, divides net burn by net new ARR for the same period. A burn multiple of 1.0 means the company is generating $1 of new ARR for every $1 of cash burned; below 1 is excellent, 1 to 2 is healthy, 2 to 3 is acceptable in a hot market, above 3 is concerning.
The metric is increasingly the headline efficiency measure for growth-stage SaaS, especially in slower funding environments. It penalizes 'growth at any cost' and rewards capital-efficient scaling.
Burn Multiple = Net Burn ÷ Net New ARR
Less than 1 is exceptional; 1 to 2 is healthy; above 3 is concerning in 2024+ markets.
Net burn $400k/mo = $4.8M/yr; net new ARR added in the year = $3.2M. Burn multiple = $4.8M ÷ $3.2M = 1.5×, 'great' on the Sacks scale (1 to 1.5×). Above 3× means rethink spend.
Burn multiple is a headline efficiency metric on the Traction or Financials slide for growth-stage SaaS.
Burn Multiple shows up most often in these scoring rubrics and investor profiles, jump straight to who cares about it and how to pitch them.
Annual Recurring Revenue, the value of subscription contracts on a normalized 12-month basis, the headline SaaS revenue metric.
Monthly cash outflow minus cash inflow, the actual rate at which the cash balance is depleted.
The number of months the current cash balance will last at the current net burn rate before the company runs out of money.
A SaaS health benchmark: revenue growth rate plus profit margin should sum to at least 40%.
A SaaS sales-efficiency ratio: net new ARR divided by sales and marketing spend in the prior period.
Long-form deep dives on the slides Burn Multiple most often shows up on.
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