Burn Rate
How much cash your startup spends each month, net of any revenue.
Definition
Burn rate measures how quickly a startup consumes its cash reserves. Gross burn is total monthly cash spent; net burn subtracts monthly revenue from gross burn to show the true cash drain. Net burn is what determines runway. Common cost categories include salaries, cloud infrastructure, marketing, office, and software subscriptions.
Why It Matters
Understanding burn rate lets you manage your runway proactively. A rising burn rate with flat revenue signals trouble; a rising burn rate with accelerating revenue is often intentional investment in growth. Investors scrutinize burn during downturns to assess how long a startup can survive without additional capital.
Example
If you spend $120,000/month and bring in $30,000 in revenue, your net burn rate is $90,000/month.