Burn Multiple

A capital efficiency metric measuring how much cash is burned for each dollar of net new ARR generated during a period.

What it shows

Burn Multiple reveals how efficiently the business converts investor capital into recurring revenue growth. Rising burn multiple signals the business is spending more to acquire each dollar of new ARR — a critical warning sign before a fundraise or profitability push.

Formula

Burn Multiple = Net Cash Burned in Period ÷ Net New ARR Added in Period. Benchmarks: <1x is excellent, 1-1.5x is good, 1.5-2x is acceptable, >2x requires explanation to investors.