Every startup talks about growth. But how efficiently are you growing? Are you burning too much cash for every rupee of revenue?
That’s where Burn Multiple comes in. It is a simple yet powerful metric that tells you how capital-efficient your startup truly is.
Let’s break it down.
What is Burn Multiple?
Burn Multiple measures how much cash your startup is burning to generate each unit of net new revenue. It answers a key question:
How much am I spending to grow my top line?
Formula:
Burn Multiple = Net Burn / Net New Revenue
Where:
- Net Burn = Cash spent (expenses – revenue)
- Net New Revenue = Revenue growth over a specific period (typically quarter-on-quarter)
It’s a clean, focused way to understand how well your spending translates into results.
Why Burn Multiple Matters
In an era where investors care about sustainable growth, not just vanity metrics, Burn Multiple is a leading indicator of:
- Efficiency
- Runway management
- Scalability
- Fundability
It helps founders, CFOs, and investors assess whether growth is being driven smartly or expensively.
What’s a Good Burn Multiple?
Here’s a helpful benchmark to evaluate how efficiently your startup is converting cash into growth:
| Burn Multiple | Efficiency Rating | What It Means |
|---|---|---|
| < 1.0 | ✅ Excellent | You’re generating more revenue than you’re burning. This means you are extremely efficient. This is rare and highly attractive to investors. |
| 1.0 – 1.5 | 👍 Strong | Solid capital efficiency, often seen in well-run SaaS or scalable businesses. You’re growing in a sustainable way. |
| 1.5 – 2.0 | ⚠️ Caution Zone | You’re still growing, but burning more aggressively. Monitor closely and ensure ROI on spend is clear. |
| > 2.0 | 🚫 Inefficient | Red flag territory. You’re spending too much for the growth you’re getting. This may hurt fundraising or indicate a flawed GTM strategy. |
Investors today are more focused on capital efficiency than ever before. A good Burn Multiple shows you’re not just growing, but you’re growing wisely.
Burn Multiple vs. Growth at All Costs
During funding booms, startups often focused on top-line growth at any cost. But in today’s market, the rules have shifted:
- High burn with low growth = red flag
- Smart burn with steady growth = investable signal
Burn Multiple tells the story behind your growth. Two startups may add ₹1 Cr in revenue, but if one burns ₹50L and the other burns ₹3 Cr to do it, the difference is massive.
Sample Example
Startup A (Q1 → Q2)
- Net Burn: ₹2 Cr
- Revenue grew from ₹1.5 Cr to ₹2.5 Cr → Net New Revenue: ₹1 Cr
- Burn Multiple = ₹2 Cr / ₹1 Cr = 2.0x → Concerning
Startup B (Same Period)
- Net Burn: ₹80L
- Revenue grew from ₹3 Cr to ₹4 Cr → Net New Revenue: ₹1 Cr
- Burn Multiple = ₹80L / ₹1 Cr = 0.8x → Excellent
Even though both added ₹1 Cr in revenue, Startup B did it far more efficiently, which would impress any investor.
How Founders Can Improve Burn Multiple
Here are 4 ways to improve your burn efficiency:
1. Focus on High-ROI Channels
Cut underperforming acquisition channels and double down on what converts profitably.
2. Optimize Cost Structures
Reduce fixed expenses, renegotiate vendor contracts, and streamline headcount to match your stage.
3. Monetize Faster
Improve your activation-to-revenue timeline. The sooner users pay, the stronger your cash position becomes.
4. Tighten Your GTM Strategy
Target more qualified leads, shorten sales cycles, and drive better conversion rates from existing traffic.
Burn Multiple vs Other Key Metrics
| Metric | What It Tracks | Why It Matters |
|---|---|---|
| Burn Multiple | Cash spent per ₹1 revenue gained | Measures overall growth efficiency |
| CAC | Cost to acquire a customer | Helps plan marketing spend |
| LTV | Total value from a customer | Informs long-term profitability |
| Runway | Months of cash left | Indicates how long you can survive |
Burn Multiple ties these together — it zooms out and shows whether your growth engine is worth the fuel you’re pouring in.
Final Thought
Burn Multiple is more than a formula, it’s a reality check. In today’s ecosystem, where cash is no longer cheap, knowing how much you burn to grow isn’t optional, it’s critical.
Because growth without discipline isn’t impressive.