Burn Multiple Calculator

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.