Most founders track runway obsessively — how many months of cash are left at the current burn rate. It's an important number, but it answers a narrower question than most people think: it tells you how long you have, not whether you're spending well to get where you're going. That second question is what Burn Multiple actually measures.
The formula
Burn Multiple is Net Burn divided by Net New ARR (annual recurring revenue) over the same period. A company burning $200,000 in a quarter while adding $200,000 in net new ARR has a Burn Multiple of 1.0x — spending a dollar to gain a dollar of new recurring revenue. A company burning $600,000 to gain that same $200,000 has a Burn Multiple of 3.0x — a much less efficient trade.
Why this matters more than runway alone
Two companies can have identical runway and completely different stories. One is burning efficiently and compounding revenue quickly toward its next milestone. The other is burning the same amount of cash with far less to show for it. Runway alone can't tell those two situations apart — Burn Multiple can.
What counts as a healthy number
Rough benchmarks vary by stage and category, but as a general reference point: a Burn Multiple under 1.5x is generally considered strong, 1.5x–3x is common and often acceptable depending on growth stage, and above 3x tends to draw real scrutiny in a fundraising conversation. These aren't hard rules — an early-stage company investing heavily in product may reasonably run a higher multiple for a period — but they're the range experienced investors are mentally checking against.
Why this is worth tracking monthly, not just before a raise
The founders who get caught off guard by this number are usually the ones who only calculate it right before a fundraising conversation. Tracking it monthly turns it into an operating discipline instead of a surprise — and gives you time to course-correct well before it becomes the reason a term sheet doesn't materialize.