Gross Burn vs Net Burn — Which Matters More?
Gross burn is total monthly spending. Net burn is the actual cash drain after revenue. Investors focus on net burn for runway calculations and burn multiple. Your finance team should track gross burn for budget management.
At early stages when revenue is negligible, gross and net burn are nearly identical. As revenue scales, net burn becomes the more meaningful metric — a company with $500K gross burn and $400K revenue has only $100K net burn, even though it's spending aggressively.
The Burn Multiple
Burn multiple = net burn ÷ net new ARR. It answers "how much cash does it cost to generate $1 of new ARR?" A burn multiple below 1× is capital-efficient. Above 2× raises concerns. Above 4× is a red flag that most Series B investors won't fund through. This metric became central to investor diligence after the 2022 market correction.
When to Start Fundraising
The rule of thumb: start your next fundraising process when you have 12–18 months of runway. This gives you 6 months to close the round while retaining 6–12 months of operating buffer.
Never start fundraising with less than 9 months of runway — you'll be negotiating from desperation, and investors will price that in. Distressed raises are expensive: down rounds, heavy dilution, or bridge terms that create structural problems for future rounds.
18 mo
Target runway for comfortable fundraising
1×
Target burn multiple for Series B readiness
6 mo
Time to close a typical funding round
12 mo
Minimum runway to begin fundraising