burn multiple

Definition

A capital efficiency metric calculated as net burn divided by net new ARR, measuring how many dollars a company incincinerates to generate each dollar of recurring revenue. A burn multiple under 1.5x suggests efficiency; above 3x suggests a bonfire of investor capital.

Example Usage

Their burn multiple of 4.2x meant they were spending $4.20 for every dollar of new ARR, which is why we passed on the Series B.

Origin

SaaS metrics terminology popularized by David Sacks and Craft Ventures in the early 2020s

Fun Fact

Burn multiple became suddenly fashionable in 2022-2023 when the "growth at all costs" era ended and investors rediscovered profitability.

Source: SaaS metrics and venture capital analysis frameworks

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