Calculate gross/net burn rate, runway, and project cash flow scenarios for your startup. Make informed decisions about hiring, spending, and fundraising timing.
MONTHLY EXPENSES
Formulas:
Gross Burn = Total Monthly Expenses
Net Burn = Expenses - Revenue
Runway = Cash / Net Burn Rate
Enter your cash balance and expenses
Add revenue to calculate net burn rate
| Stage | Median Burn | Team Size | Salary % of Burn |
|---|---|---|---|
| Pre-Seed | $25K/mo | 2-4 | 50-60% |
| Seed | $75-100K/mo | 5-12 | 65-70% |
| Series A | $250-350K/mo | 15-30 | 68-75% |
| Series B | $700-900K/mo | 40-80 | 70-76% |
Personnel costs represent 68% of total burn for typical seed-stage startups. Each new hire costs roughly 25-30% above base salary when including taxes, benefits, and overhead. Use the CAC calculator to evaluate whether your marketing spend within that burn is efficient.
| ARR Range | Median Multiple | Assessment |
|---|---|---|
| Pre-$1M ARR (Seed) | 2.5-3.4x | Expected at early stage |
| $1M-$3M ARR | 1.5-1.7x | Acceptable for Series A |
| $3M-$10M ARR | 0.8-1.2x | Good |
| $25M-$50M ARR | 1.4x | Target at scale |
| Below 1x = excellent | 1-1.5x = good | 1.5-2.5x = acceptable early-stage | Above 3x = red flag | ||
As ARR scales, investors expect burn multiples to improve. In 2026, capital efficiency expectations have tightened significantly compared to 2021-2022. Early-stage multiples of 2.5-3.4x are tolerated because go-to-market requires upfront investment, but above 3x at any stage raises concerns about product-market fit. Use the CAC payback calculator to evaluate whether your spend efficiency supports your burn multiple target.
Burn rate is one of the most critical metrics for venture-backed startups and any company operating before achieving profitability. It measures the speed at which a company consumes its cash reserves to fund operations, essentially answering the question: how quickly are we spending our money?
According to Y Combinator, understanding burn rate is fundamental to startup survival. The metric comes in two forms: gross burn rate (total monthly operating expenses) and net burn rate (expenses minus revenue). Most investors and founders focus on net burn rate because it reflects actual cash consumption after accounting for revenue generation.
The burn rate directly determines your runway, which tells you how many months your startup can survive before running out of cash. This calculation is essential for fundraising timing, hiring decisions, and strategic planning. A startup with $2 million in the bank and a $100,000 monthly net burn rate has 20 months of runway, giving founders a clear timeline for achieving milestones or raising additional capital.
Industry best practices from firms like Andreessen Horowitz and Sequoia Capital have historically recommended 18-24 months of runway after each funding round. In 2026, the standard has shifted upward: most VCs now expect 24+ months of runway post-raise, and some push for 36 months. The median seed-to-Series A gap has stretched to roughly 20 months, making longer runway essential. Founders who wait until runway drops below 6 months often find themselves in difficult negotiating positions with investors.
Track your burn rate alongside your MRR (Monthly Recurring Revenue) to understand how quickly you're moving toward sustainability. The relationship between burn rate and revenue growth tells the story of your startup's capital efficiency, a key factor in how investors evaluate your business. Combine burn analysis with customer lifetime value (LTV) and customer acquisition cost (CAC) to see whether your spending is generating sustainable unit economics.
Burn rate is the monthly rate at which a startup spends cash. Gross burn rate equals total monthly operating expenses. Net burn rate subtracts revenue from expenses. Runway equals cash reserves divided by net burn. In 2026, VCs recommend 24+ months of runway after each funding round, up from the previous 18-month standard. Start fundraising at 9-12 months remaining.
A healthy burn rate depends on stage. Seed-stage startups typically burn $75-100K per month, with personnel representing 60-70% of total burn. Series A companies burn $250-350K monthly. Capital efficiency is measured by burn multiple (net burn divided by net new ARR): below 1x is excellent, 1-1.5x is good at Series A, and above 3x is a red flag at any stage. In 2026, the median seed-to-Series A interval is roughly 20 months, making capital discipline essential.
Gross Burn Rate = Total Monthly Operating Expenses
Net Burn Rate = Monthly Expenses - Monthly Revenue
Runway (months) = Current Cash Balance / Net Burn Rate
Add up all recurring monthly costs including:
The sum of all expenses from Step 1 equals your gross burn rate. This represents your total monthly cash outflow regardless of revenue. Gross burn is useful for understanding your cost structure and identifying areas for optimization.
Subtract your monthly revenue from gross burn to get net burn rate. If you're pre-revenue, net burn equals gross burn. As revenue grows, net burn decreases until you achieve profitability (net burn becomes negative, meaning cash positive).
Divide your current cash balance by net burn rate to determine runway in months. This tells you how long you can operate before running out of money. Target 24+ months after each funding round. Use the runway calculator for detailed projections with different scenarios.
Using gross burn (total expenses) instead of net burn (expenses minus revenue) for runway calculations understates your actual runway. If you spend $150K/month but earn $50K, your net burn is $100K, not $150K. Always use net burn for runway projections.
Paul Graham's framework asks: given your current expenses, revenue, and growth rate, will you reach profitability before running out of cash? Many founders track burn rate in isolation without modeling whether revenue growth will outpace expenses in time. If you're "default dead," you need to either cut burn or raise capital before you enter the fatal pinch.
Burn rate changes with every hire, contract renewal, and marketing campaign. A common mistake is planning runway based on today's burn without modeling planned hires. Each engineering hire adds $12K-$20K/month in fully-loaded cost. Three hires at $15K each adds $45K/month, reducing a 20-month runway to 14 months.
Many startups ramp marketing spend immediately after closing a round before validating that their CAC is sustainable. Burn rate should increase gradually as you prove unit economics. Track your LTV:CAC ratio before scaling spend. A ratio below 3:1 means you're burning cash faster than you're creating long-term value.
Burn rate alone doesn't tell investors whether your spending is efficient. Burn multiple (net burn / net new ARR) is the metric VCs use to evaluate capital efficiency. A startup burning $200K/month but adding $150K in net new ARR has a burn multiple of 1.3x, which is strong. One burning $200K/month but adding only $40K ARR has a 5x burn multiple, which signals unsustainable spending regardless of runway. In 2026, Series A investors treat sub-1.5x as a baseline requirement, not an aspirational target.
While burn rate and runway are closely related, they measure different aspects of your startup's financial health. Understanding both metrics and how they interact is essential for effective cash management and strategic planning.
The key insight is that runway depends on both your cash reserves and your burn rate. A startup with $500K in cash and $50K net burn has 10 months of runway, the same as a startup with $1M in cash and $100K net burn. This is why investors evaluate both metrics together when assessing a startup's financial position. Use a runway model to test different scenarios.
A B2B SaaS startup has raised $1.5M in seed funding. Monthly expenses: $80K (salaries), $5K (rent), $15K (marketing), $5K (software), $5K (other). Monthly revenue: $15K MRR.
Gross Burn = $110,000/month
Net Burn = $110,000 - $15,000 = $95,000/month
Runway = $1,500,000 / $95,000 = 15.8 months
With 15.8 months runway, this startup should begin Series A fundraising in 6-7 months to maintain negotiating leverage. Track MRR growth to show investors momentum.
A post-Series A startup has $5M in the bank. Monthly expenses: $200K (salaries), $20K (rent), $80K (marketing), $15K (software), $15K (other). Monthly revenue: $80K.
Gross Burn = $330,000/month
Net Burn = $330,000 - $80,000 = $250,000/month
Runway = $5,000,000 / $250,000 = 20 months
With 20 months runway, this company has flexibility to invest in growth while maintaining a healthy buffer. Use valuation benchmarks to prepare for the next round.
A startup has $400K remaining after a failed product pivot. Monthly expenses: $60K (salaries after layoffs), $8K (rent), $5K (marketing), $4K (software), $3K (other). Monthly revenue: $5K.
Gross Burn = $80,000/month
Net Burn = $80,000 - $5,000 = $75,000/month
Runway = $400,000 / $75,000 = 5.3 months
With only 5.3 months runway, this startup is in critical condition. Options include immediate further cost cuts, bridge financing, or accelerating revenue. A 25% reduction in burn would extend runway to 7.1 months.
While burn rate is essential for startup financial planning, it has limitations that founders and investors should understand when making decisions.
Burn rate calculations assume expenses remain constant month-over-month. In reality, startups often have lumpy expenses (quarterly payments, annual contracts, hiring spikes) that can significantly impact actual cash flow timing.
Static runway calculations don't factor in revenue growth. A startup with 10 months runway today might have significantly more if revenue is growing 20% monthly. Use ARR projections to model dynamic scenarios.
Standard burn rate excludes one-time costs or windfalls. A large legal settlement, equipment purchase, or customer prepayment can dramatically change your actual cash position compared to calculated projections.
Burn rate typically uses cash accounting, but your books may use accrual. Revenue recognized isn't always cash received, and expenses incurred aren't always cash paid. Ensure you're calculating burn based on actual cash movements.
Low burn isn't inherently good, high burn isn't inherently bad. What matters is burn efficiency, how effectively you convert spending into growth. A startup burning $200K/month growing 30% is likely healthier than one burning $50K/month growing 5%. Measure efficiency with burn multiple (net burn / net new ARR). Under 1x is excellent, 1-1.5x is good at Series A, and above 2x is a red flag for growth-stage companies.
Burn rate alone doesn't tell you whether each dollar spent generates long-term value. Pair it with LTV, CAC, and churn rate to understand whether your spending is producing durable revenue or just vanity growth.
Combine burn rate analysis with runway modeling, CAC tracking, and LTV analysis for a complete picture of startup financial health. Use the funding calculator to model how your next round changes runway.
Maintain 24+ months of runway after each funding round. The median seed-to-Series A gap is now roughly 20 months, so the old 18-month rule no longer provides adequate buffer.
Start fundraising when you have 9-12 months of runway remaining. Fundraising takes 3-6 months on average, and you want to negotiate from a position of strength.
Track both gross and net burn rate. Gross burn shows total cost structure, while net burn reflects actual cash consumption. Focus on improving both through cost efficiency and revenue growth.
Salaries typically represent 60-70% of burn rate for startups. When cutting costs, focus on non-people expenses first unless significant right-sizing is needed.
Burn efficiency matters more than absolute burn. Investors want to see efficient growth: reasonable burn producing strong results. Use burn rate alongside unit economics to demonstrate sustainable growth.