Finance
Burn multiple
Net burn divided by net new ARR in the same period. A capital-efficiency ratio: how many dollars you're burning to add one dollar of ARR.
By Maya Okonkwo · Last updated July 22, 2026
In plain English
Under 1x is elite (bootstrapped-adjacent). 1-2x is healthy VC-backed. 2-3x needs a story. Above 3x you're burning capital without commensurate growth — a fundraising problem waiting to happen.
Example
Company burns $2M/quarter, adds $1M net new ARR/quarter → burn multiple 2x. Half the cost of a customer, in the year you land them, is another way of saying it.
Formula
Burn multiple = Net burn / Net new ARR
Why it matters
David Sacks popularised the metric because a single number captures both growth AND efficiency, replacing the noisier CAC + LTV pair for board reporting. Every 2026 growth-stage board deck has this on page 3.
Common mistakes
- Computing on gross burn instead of net — inflates the number
- Ignoring seasonality in ARR — quarter-over-quarter volatility distorts the ratio
- Optimising for burn multiple by starving growth — a 0.5x burn multiple at 30% growth is worse than a 2x at 200%