The burn multiple measures capital efficiency: it divides net burn by the net new ARR that burn produced, answering "how many dollars do we burn to add one dollar of recurring revenue?" Lower is better. David Sacks' rough scale: under 1.0× is amazing, 1–1.5× great, 1.5–2× acceptable for early high-growth, and over 2× draws scrutiny. Early-stage reality runs higher, seed companies often sit around 2.5–3.4×. It's the cleanest one-number read on whether your burn is actually buying growth.
Runway tells you how long you last; the burn multiple tells you whether the burning is worth it. In a market that rewards efficient growth, it's become one of the first numbers investors check. This is the companion to the full burn rate & cash runway guide.
The burn multiple formula
Burn Multiple = Net Burn ÷ Net New ARRDollars burned per dollar of new recurring revenue
Both are measured over the same period (usually a quarter or a year). Net burn is cash out minus cash in; net new ARR is the recurring revenue added in the period (new + expansion − churn). A company that burned $2M to add $1M of net new ARR has a burn multiple of 2.0×. The lower the number, the more efficiently each dollar of spend converts into durable revenue.
What's a good burn multiple?
David Sacks (Craft Ventures), who popularized the metric, gives this scale:
| Burn multiple | Rating |
|---|---|
| Under 1.0× | Amazing |
| 1.0–1.5× | Great |
| 1.5–2.0× | OK (early high-growth) |
| Over 2.0× | Draws scrutiny |
Stage matters. Those bands describe scaling companies; seed-stage reality runs higher, often ~2.5–3.4×, and above ~3× at seed is a risk flag. Read the number in the context of your stage, not against a single universal bar.
Why it matters in 2026
Capital efficiency is what the current market rewards. Growth alone no longer earns a premium if it's bought with runaway burn, investors want to see that each dollar in produces durable revenue. The burn multiple captures that in one number, which is why it now sits alongside growth rate and the Rule of 40 in diligence. A rising burn multiple over time is a warning: you're spending more to buy each new dollar of ARR, a sign of saturation or weakening efficiency.
Burn multiple vs. burn rate vs. runway
- Burn rate, how much cash you spend per month. A level, not an efficiency measure.
- Runway, how many months of cash you have left (cash ÷ net burn). Tells you time, not quality of spend.
- Burn multiple, how much you burn per dollar of new ARR. The efficiency measure: is the burn buying growth?
You need all three. A short runway is urgent; a high burn multiple is the reason it got short.
How to improve your burn multiple
- Raise net new ARR efficiency, better CAC payback and retention mean more net new ARR per dollar spent.
- Cut unproductive burn, spend that isn't producing revenue (see the scenario calculator to test cuts against runway).
- Lift expansion / cut churn, net new ARR is net of churn, so retention directly improves the multiple.
Frequently asked questions
What is a burn multiple?
Net burn ÷ net new ARR over a period, how many dollars of cash you burn to add one dollar of new recurring revenue. It's a capital-efficiency metric: lower is better.
What is a good burn multiple?
Under 1.0× is amazing, 1–1.5× great, 1.5–2× acceptable for early high-growth, over 2× concerning (David Sacks' scale). Seed-stage companies often run higher, around 2.5–3.4×; above ~3× at seed is a risk flag.
How is burn multiple different from burn rate?
Burn rate is how much cash you spend per month (a level). Burn multiple divides net burn by the net new ARR it produced (an efficiency ratio). Burn rate tells you how fast; burn multiple tells you whether it's worth it.
Why do investors care about the burn multiple?
It's the cleanest one-number read on capital efficiency, whether spending is producing durable revenue. In a market that rewards efficient growth, a low and stable burn multiple signals a business that can scale without runaway cash consumption.
Track it in Adlega
Adlega ties net burn and net new ARR together in your financial model, so the burn multiple falls out automatically alongside runway and the Rule of 40, and the AI CFO flags when it drifts the wrong way. Estimate your runway now with the free runway calculator. Try Adlega free while it is in beta.
Related: burn rate & runway, gross vs net burn, Rule of 40, and build a SaaS financial model.