What Is Burn Multiple?
Definition
Burn multiple measures how much a startup burns to generate each dollar of new recurring revenue: net cash burned divided by net new ARR. Coined by David Sacks, lower is better — a burn multiple under 1 is efficient, while a high multiple means growth is expensive.
Key takeaways
- Burn Multiple = net cash burned ÷ net new ARR (same period).
- Lower is better — under ~1 is efficient, over ~2 is concerning.
- It exposes how capital-efficient your growth actually is.
How to calculate it
Burn Multiple = Net Cash Burned ÷ Net New ARR
How to read it
| Burn Multiple | Efficiency |
|---|---|
| Under 1 | Great |
| 1 – 1.5 | Good |
| 1.5 – 2 | Suspect |
| Over 2 | Concerning |
Frequently asked questions
What is burn multiple?
The net cash a company burns divided by the net new ARR it generates — a measure of how efficiently it converts spend into recurring revenue.
What's a good burn multiple?
Under 1 is excellent; 1–1.5 is good. Above 2 suggests growth is costing too much cash.
How is burn multiple different from the magic number?
The magic number focuses on S&M efficiency; burn multiple captures total cash burn — including R&D and overhead — against new ARR.
Related service: Track efficiency metrics in HubSpot