A capital-efficiency metric measuring how much cash a company burns to add each pound of net new annual recurring revenue.
Burn multiple = net cash burn ÷ net new ARR (both over the same period)
A startup burns £2M of net cash over a year and grows ARR from £4M to £7M (£3M net new ARR).
£2M ÷ £3M = 0.67x — efficient, comfortably under 1x
Burn multiple, introduced by investor David Sacks in 2020, divides your net cash burn over a period by the net new ARR you added in the same period. It answers one blunt question: how many pounds are you torching to generate one pound of new recurring revenue?
Lower is better, and the scale is unforgiving. Under 1x is elite — you add more ARR than you burn. Between 1x and 2x is healthy for most growth-stage companies. Above 3x suggests you are buying growth far too expensively and should examine the go-to-market motion before raising or spending more.
Investors favour burn multiple because it captures the whole business in one number. Unlike CAC, which only looks at sales and marketing, it folds in product, engineering, overhead, and every other use of cash. In the efficient-growth era it is often the first metric a board checks.
Burn multiple is the clearest test of whether growth is being bought efficiently. Two companies can add the same ARR, but the one doing it at 1x rather than 3x needs a third of the cash to get there — which means a longer runway, less dilution, and far more control over its own timeline.
Below 1x is elite, 1–1.5x is great, 1.5–2x is good, 2–3x is suspect, and above 3x is a warning sign (David Sacks' original scale). Seed-stage companies often run higher while finding product-market fit; by scale, under 1.5x is the expectation.
Under 1x is elite and means you add more ARR than you burn. 1–2x is healthy for most growth-stage companies, and anything above 3x signals you are spending too much to grow. The benchmark tightens as you scale — early-stage companies get more latitude.
CAC counts only sales and marketing spend against new customers. Burn multiple counts all cash burned — including product, engineering, and overhead — against net new ARR, so it captures the efficiency of the entire company, not just go-to-market.
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