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, 1–2 is healthy, 2–3 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.

Formula

Burn Multiple = Net Burn ÷ Net New ARR

• Net Burn — Monthly net cash burn during the period
• Net New ARR — New + expansion − churn − contraction in the same period

Less than 1 is exceptional; 1–2 is healthy; above 3 is concerning in 2024+ markets.

Worked example

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 (1–1.5×). Above 3× means rethink spend.

Common pitfalls

• Reporting burn multiple over too short a window.
• Using gross instead of net new ARR in the numerator.
• Ignoring the difference between burn multiple at small and large ARR.

When this shows up in a pitch deck

Burn multiple is a headline efficiency metric on the Traction or Financials slide for growth-stage SaaS.

See Burn Multiple in context

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.

In VC frameworks

• Tiger Global — pitch deck framework

For investor types

• Growth VC — Series A & B

Related terms

• ARR — Annual Recurring Revenue — the value of subscription contracts on a normalized 12-month basis, the headline SaaS revenue metric.
• Net Burn — Monthly cash outflow minus cash inflow — the actual rate at which the cash balance is depleted.
• Runway — The number of months the current cash balance will last at the current net burn rate before the company runs out of money.
• Rule of 40 — A SaaS health benchmark: revenue growth rate plus profit margin should sum to at least 40%.
• Magic Number — A SaaS sales-efficiency ratio: net new ARR divided by sales and marketing spend in the prior period.

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