C4 · Economics & metrics · ratio

Burn Multiple

Also: Burn Multiple

Definition. Burn Multiple is net cash burn divided by net new ARR, measuring how efficiently a company converts cash into recurring revenue growth. Proposed by David Sacks (Craft Ventures) as a capital efficiency benchmark. < 1x is strong (generating $1+ ARR per $1 burned); > 2x is concerning; > 4x signals the growth is not worth the cash cost.

established Last updated 2026-06-18 Source: David Sacks, Craft Ventures (original formulation, 2020); Bessemer Venture Partners State of the Cloud 2024; Lightspeed Venture Partners SaaS benchmarks 2024

Formula

Burn Multiple ratio

Burn Multiple = \frac{Net Burn}{Net New ARR} = \frac{Cash _{out} - Cash _{in}}{A R R _{end} - A R R _{start}}

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

Notation: Burn_Multiple = Net_Burn_period / Net_New_ARR_period = (Cash_out - Cash_in) / (ARR_end - ARR_start)

Benchmark by stage

Source: David Sacks, Craft Ventures (original formulation, 2020); Bessemer Venture Partners State of the Cloud 2024; Lightspeed Venture Partners SaaS benchmarks 2024

Stage	Burn Multiple	Notes
Amazing	< 1x	Every dollar burned generates > $1 of net new ARR; highly capital efficient
Good	1x – 1.5x	Solid efficiency; acceptable for high-growth phase with clear path to improvement
Moderate	1.5x – 2x	Acceptable if NRR is strong and market opportunity justifies spend level
Concerning	2x – 4x	Growth is expensive; review GTM efficiency before further investment
Problematic	> 4x	Capital destruction; fundamental GTM or product issues likely

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	Net burn = total cash outflows minus cash collections (not GAAP revenue). Net new ARR = ending ARR minus beginning ARR (inclusive of churn and contraction). Both must reflect the same time period (typically quarterly).

Common errors

Using gross burn instead of net burn — overstates the burn figure by ignoring cash collected
Using gross new ARR (bookings) instead of net new ARR — ignores churn destroying ARR
Calculating on monthly basis and not annualizing for comparison to annual benchmarks
Not adjusting for large one-time cash events (asset sales, deposits) that temporarily reduce net burn
Ignoring that burn multiple is a lagging indicator — improving it requires quarter-long operational changes

Where this sits

Part of the Economics & metrics (C4) cluster in the GTM World Model. Related to the model's "Burn Multiple and Magic Number are inverse proxies: Burn_Multiple ≈ 1 / (Magic_Number × GM%); at GM% = 75% and Magic Number = 1.0, Burn Multiple ≈ 1.33x" 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