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Total burn divided by net new ARR gives you a single-number readout of SaaS capital efficiency. Classified into the David Sacks bands investors use during diligence: exceptional, great, OK, suspect, bad. URL-shareable so you can drop the link into a board deck or investor update without recreating the math.
Burn multiple = total burn divided by net new ARR over the same period. It is the single-number heuristic SaaS investors use to gauge capital efficiency: how many dollars of burn produced one dollar of new annual recurring revenue. Lower is better.
David Sacks popularised the metric in a 2020 essay arguing that growth alone is the wrong yardstick — the right yardstick is how efficiently a company is converting burn into ARR. Sacks proposed the bands (exceptional / great / OK / suspect / bad) the calculator uses below.
Burn multiple <1× is exceptional, 1–1.5× is great, 1.5–2× is OK and typical for the stage, 2–3× is suspect (investors will dig into unit economics), >3× is bad and most growth-stage investors will pass. Bands tighten at growth stage (Series C and later) and loosen at very early stage where ARR is small enough to be noisy.
The most common choices are quarterly (3 months) and annual (12 months). Quarterly is more reactive but can be noisy at low ARR. Annual smooths quarter-to-quarter lumpiness and is the period most investor benchmark reports (Bessemer, ICONIQ, OpenView) use. Pick the one that matches your audience.
Burn multiple is undefined if net new ARR is zero or negative. The team consumed cash but did not grow the revenue base, so any ratio you'd produce is misleading. The calculator says 'undefined' in this case and explains the failure mode. If you are in this state, focus on the underlying growth problem before defending the burn number.
No — burn multiple is a top-line metric. Two companies with the same burn multiple can have very different unit economics. Investors always pair burn multiple with gross margin (≥75% for healthy SaaS), CAC payback (≤24 months at scale), magic number (≥1 at growth stage), and net dollar retention (≥110% for best-in-class). Use burn multiple as the headline and the others as the supporting cast.
Definition
The underlying number that goes into burn multiple — gross vs net burn, and why investors care.
Companion tool
Burn multiple tells you efficiency. Runway tells you how long before you need to raise.
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Drop the live burn multiple calculator into a newsletter, blog, or portal. The snippet ships a visible source credit linking back here.
Burn multiple
1.25×
Great — investors will lean in.
Net new ARR
$1.2M
Ending ARR minus starting ARR.
Total burn
$1.5M
Cash consumed over the measurement period.
Monthly avg burn
$125k
Total burn / 12 months.
Sacks bands: <1× exceptional · 1–1.5× great · 1.5–2× OK · 2–3× suspect · >3× bad. Bands tighten at growth stage and loosen at very early stage.
Why this metric: burn multiple is the SaaS-investor heuristic for capital efficiency. Lower means every dollar of burn produced more ARR. Always paired with growth rate — a 3× burn multiple at 200% year-on-year is different from 3× at 30%.
The URL contains your inputs — share it with your board, co-founder, or prospective investor.
Educational tool. Real efficiency analysis uses net dollar retention, gross margin, sales efficiency (magic number, CAC payback), and growth rate alongside burn multiple. Not financial planning advice.