Burn Multiple Calculator
Calculate the "Burn Multiple", a startup capital efficiency metric, just by entering net burn and Net New ARR for a period. Instantly see a rating based on David Sacks' benchmark (Amazing, Great, Good, Suspect, or Bad).
Burn Multiple benchmark (proposed by David Sacks)
| Range | Tier | Meaning |
|---|---|---|
| Below 1 | Amazing | Top tier. Net New ARR exceeds cash burned, indicating exceptional capital efficiency. |
| 1 to below 1.5 | Great | Excellent efficiency that investors tend to rate highly. |
| 1.5 to below 2 | Good | A healthy level, roughly in line with industry averages. |
| 2 to below 3 | Suspect | Worth reviewing sales efficiency and spending structure. |
| 3 or above | Bad | Danger zone. At this pace, raising future funding is likely to become difficult. |
What Is the Burn Multiple?
The Burn Multiple Calculator distills a startup's capital efficiency into a single number by combining two inputs: net burn (the cash you spent during a period) and Net New ARR (the annual recurring revenue you added over the same period). The result tells you how many dollars of cash it took to generate one dollar of new ARR — the lower the number, the more efficiently the company is turning cash into growth.
Beyond the simple division, this tool automatically maps your result onto David Sacks' five-tier benchmark, from "Amazing" down to "Bad," so you instantly know where you stand. A reverse mode is also included: enter your expected Net New ARR and a target Burn Multiple, and the tool works out the maximum burn you can afford while staying within that target. Keep in mind that a single month or quarter can swing sharply around the timing of a large deal or a churn event, so it's best treated as a trend to track over multiple periods rather than a one-off snapshot.
How to Calculate Your Burn Multiple
- Enter your net burn for the period Enter how much cash actually left your company's bank account during the period you want to measure — monthly or quarterly — into the "net burn" field. This is your negative operating cash flow.
- Enter Net New ARR for the same period In the "Net New ARR" field, enter the increase in annual recurring revenue over that same period, net of any losses from churn or downgrades.
- Click "Calculate" to see your result The tool displays your Burn Multiple along with a five-tier rating (Amazing through Bad) based on David Sacks' benchmark.
- Use the simulation to test sensitivity Drag the sliders to adjust net burn and Net New ARR and see in real time how much movement is needed to shift your rating up or down a tier.
- Switch to reverse mode to work backward from a target If you already know the Burn Multiple you want to hit, enter your expected Net New ARR and that target to calculate the maximum burn you can afford.
Tips for getting more out of it
- Net burn is usually taken from "cash flow from operations", not the accounting net loss (which includes non-cash items like depreciation) — make sure you're using the cash-based figure.
- When calculating monthly, use that month's burn and Net New ARR; when calculating quarterly, use the sum over three months, so the time granularity matches on both sides.
- A single month's figure can swing sharply around the timing of large deal closes, so tracking a 3-6 month rolling average gives a more reliable trend.
- While the Magic Number measures sales efficiency relative to S&M spend, Burn Multiple is a broader metric measuring growth efficiency relative to total company cash burn.
When to Use the Burn Multiple Calculator
Preparing for fundraising conversations
Calculate your Burn Multiple before meeting investors so you know exactly which tier you fall into and can speak confidently about your capital efficiency and planned use of funds.
Reporting to your board or leadership team
Track Burn Multiple as a recurring monthly or quarterly metric and present it as a trend line, so a single noisy month doesn't distort the story you're telling about capital efficiency.
Comparing efficiency across business units or product lines
Calculate net burn and Net New ARR separately for each business unit to see side by side which parts of the company convert cash into growth most efficiently.
Setting a burn ceiling during budget planning
Use reverse mode with next year's expected Net New ARR to decide upfront how much you can afford to burn while still hitting your target Burn Multiple, then use that figure as a budget guardrail.
Evaluating a target company during due diligence
If you're an investor, plug in the net burn and ARR figures a prospective SaaS company has shared across several periods to see how their capital efficiency trend has evolved.
Glossary
- Burn Multiple
- Net burn for a period divided by Net New ARR for the same period. It measures how much cash it took to generate one dollar of new annual recurring revenue, and was popularized by David Sacks, founder of the venture capital firm Craft Ventures.
- Net Burn
- The amount of cash that actually left the company's bank account during a given period, equivalent to negative cash flow from operations. It's distinct from accounting net loss, which includes non-cash items like depreciation.
- Net New ARR
- The increase in annual recurring revenue over a period, after subtracting any reduction from churn or downgrades — the true net growth in recurring revenue.
- ARR (Annual Recurring Revenue)
- The annualized value of recurring subscription revenue that a SaaS business can reliably expect each year as long as contracts continue.
- Capital Efficiency
- A general concept describing how much growth or return a company generates relative to the capital it spends. Metrics like Burn Multiple and Magic Number both express this as a ratio of cash consumed to results produced.
- Runway
- The number of months a company's current cash reserves will last at its current burn rate. A sustained high Burn Multiple tends to eat into runway faster, shrinking the time available before the next fundraise is needed.
- Cash Flow
- The actual inflow and outflow of cash over a period. Net burn is derived from negative operating cash flow, reflecting cash that actually moved rather than accounting profit or loss.
Frequently Asked Questions
Side Note — A new buzzword born from the end of the zero-interest-rate era
Burn Multiple rapidly gained popularity around 2022, right as the end of the so-called "zero interest rate era" triggered a major shift in venture capital's investment posture. Before that, the prevailing mindset was "as long as you're growing, burning cash is fine — you can always raise more." But once rising interest rates made fundraising harder, investors began scrutinizing growth efficiency far more closely. Burn Multiple, popularized by David Sacks of Craft Ventures, quickly became the symbol of this shift in mood.
One reason the metric caught on so quickly is its simplicity compared to existing capital efficiency metrics like the Magic Number or LTV/CAC ratio. It can be computed from just two numbers any founder should already track monthly — net burn and Net New ARR — and its intuitive threshold ("below 1 is exceptional") made it an instant common language in investor conversations and board meetings.
That said, Burn Multiple is only a single-month or single-quarter snapshot, and can swing significantly around the timing of a large contract renewal or churn event. Rather than reacting to a single bad month, it's generally considered best practice to track the trend over several quarters and combine it with other metrics like the Rule of 40 or LTV/CAC ratio for a well-rounded view.