C4 · Economics & metrics · ratio

Burn Multiple

Also: Burn Multiple

Definition. Burn Multiple is net cash burn divided by net ARR added over the same period. Define which operating and investing cash flows are included and exclude financing proceeds. It summarizes observed cash consumption relative to recurring-revenue growth; it is not an incremental GTM return or an inverse Magic Number.

ratio definition established under a disclosed cash and ARR convention; benchmark interpretation is heuristic Last updated 2026-06-18 Source: David Sacks/Craft Ventures practitioner framework (2020). Historical score bands below are heuristics for positive net ARR growth, not causal tests or universally applicable targets.

Formula

Burn Multiple ratio

Burn Multiple = \frac{net cash burn _{[a, b]}}{A R R _{b} - A R R _{a}}, A R R_{b} > A R R_{a}

Plain English: Burn Multiple = Net Burn / Net New ARR

Notation: Burn_multiple = net_operating_cash_burn_[a,b] / (ARR_b - ARR_a), for positive net ARR added; disclose any investing/capex convention

Benchmark by stage

Source: David Sacks/Craft Ventures practitioner framework (2020). Historical score bands below are heuristics for positive net ARR growth, not causal tests or universally applicable targets.

Stage	Burn Multiple	Notes
Amazing	< 1x	Historical practitioner band for positive net ARR growth; not a causal attribution or investment rule.
Good	1x – 1.5x	Historical practitioner band for positive net ARR growth; not a causal attribution or investment rule.
Moderate	1.5x – 2x	Historical practitioner band for positive net ARR growth; not a causal attribution or investment rule.
Concerning	2x – 4x	Historical practitioner band for positive net ARR growth; not a causal attribution or investment rule.
Problematic	> 4x	Historical practitioner band for positive net ARR growth; not a causal attribution or investment rule.

Naive vs corrected

Version	Formula
Naive	Gross burn / gross new ARR (ignores revenue offsets on burn side and churn on ARR side; paints an incomplete picture of cash efficiency)
Corrected	Use a disclosed cash-burn convention, exclude equity/debt financing inflows, and use ending minus beginning ARR on a consistent policy. Match both to the same period. Report numerator and denominator separately when net ARR added is zero or negative; the usual positive-growth bands do not apply.

Common errors

Using gross outflows instead of net operating cash burn
Treating financing proceeds as operating cash collections
Comparing one month of burn with one year of ARR growth
Treating a negative ratio caused by shrinking ARR as strong efficiency
Assuming burn multiple is the inverse of Magic Number

Where this sits

Part of the Economics & metrics (C4) cluster in the GTM World Model. Related to the model's "Burn_multiple=net_cash_burn/ΔARR for ΔARR>0. Total burn includes costs, collections and working-capital effects outside S&M, so there is no general identity Burn_multiple=1/(Magic×margin). Negative burn with positive growth describes cash-generating growth; zero/negative growth requires separate interpretation." equation.

magic number →rule of 40 →arr →nrr →

How to cite this

@misc{shalvi_gtm_metric_burn_multiple_2026,
  author = {Singh, Shalvi},
  title  = {Burn Multiple — GTM World Model Metrics},
  year   = {2026},
  url    = {https://shalvisingh.com/gtm/metrics/burn-multiple}
}

Singh, Shalvi. "Burn Multiple — GTM World Model Metrics." shalvisingh.com, 2026. https://shalvisingh.com/gtm/metrics/burn-multiple