What is a good burn rate for a startup?

A good burn rate is whatever gives you 18 to 24 months of runway to reach your next milestone. There’s no magic number that works for every startup because the right amount to spend depends on your stage, your growth rate, and what you need to prove before raising again.

Burn rate is how much cash you spend each month beyond what you bring in. Gross burn is your total monthly expenses. Net burn is gross burn minus revenue. Early stage startups often have gross and net burn that are nearly identical because revenue is minimal. As you grow, the gap between them should widen.

The 18 to 24 month runway benchmark exists because that’s typically how long it takes to hit meaningful milestones and raise the next round. If you’re burning $50,000 per month with $900,000 in the bank, you have 18 months of runway. That’s workable. Burning $100,000 with the same cash gives you 9 months, which is tight because fundraising alone takes 3 to 6 months.

Once you have meaningful revenue, burn multiple becomes a better measure than raw burn rate. Burn multiple is net burn divided by net new ARR. A burn multiple under 2 is efficient. Under 1 is excellent. Over 3 and investors start asking hard questions about unit economics and whether growth is sustainable.

Investors care about burn rate because it signals discipline. A startup burning $200,000 per month with nothing to show for it looks different than one burning the same amount with clear progress toward product-market fit. The absolute number matters less than what you’re getting for it.

Some founders burn too conservatively. They stretch runway by underinvesting in growth, then can’t hit the metrics needed for the next round. Others burn too aggressively, chasing growth before they’ve figured out what actually works. The sweet spot is spending enough to learn fast without running out of cash before you figure things out.

Track your burn monthly and project forward. Know exactly how many months of runway you have at all times. If it drops below 12 months, you should already be fundraising or cutting costs. Working with a startup bookkeeper who understands these metrics helps you see your cash position clearly instead of guessing. And if you’re planning to raise, having clean books and accurate burn figures makes due diligence faster and smoother.