Burn Multiple
Definition
Burn multiple is net cash burned divided by net new ARR over the same period, measuring how efficiently a startup buys growth. Under 2 is considered fundable in 2026; under 1.5 is strong.
How it comes up in fundraising
Investors use burn multiple as a first-screen efficiency metric: burning $3M to add $1M of ARR (a 3x multiple) signals an expensive growth engine.
Frequently asked questions
Why did burn multiple become important?
After 2022, capital stopped subsidizing inefficient growth; burn multiple compresses growth and efficiency into one number investors can compare across companies.
How do I improve my burn multiple?
Grow revenue faster than spending: better retention, higher-margin channels, and pricing power all move it more than cost cuts alone.
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