Burn rate is the single most important number for an early-stage startup. It tells you how fast you're spending cash, how long you have left, and whether you need to raise before the money runs out. Here's how to calculate it correctly.
Burn rate is the monthly rate at which your startup spends cash. There are two versions every founder needs to know: gross burn and net burn.
Gross burn is your total monthly cash outflow — every dollar going out, regardless of revenue.
Net burn subtracts revenue, giving you the actual cash you're losing each month.
Your startup spends $80,000/month on salaries, software, and marketing. You're generating $12,000/month in MRR.
Gross burn: $80,000/mo
Net burn: $80,000 − $12,000 = $68,000/mo
Use net burn for runway calculations — it's the real number. Use gross burn when talking to investors about your cost structure, or when you want to understand your spending baseline independent of revenue volatility.
Investors will ask for both. Know both cold.
There's no universal answer, but here are the benchmarks most investors use:
The more important metric is your burn multiple: net burn divided by net new ARR. Below 1.5x is strong; above 3x is a problem.
Recalculate every month, minimum. If you're within 6 months of running out of cash, recalculate weekly. Burn rate changes every time you hire, sign a contract, or land a new customer.
Greenline calculates your gross and net burn rate in real time from your transactions. No spreadsheets required.
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