The calculations
Gross burn is the total cash going out each month. Net burn is gross burn minus revenue (or any other cash inflows). For pre-revenue companies, these are the same. For revenue-generating companies, net burn is usually the more useful number.
Runway is cash divided by net burn. $3M cash with $150K net burn per month equals 20 months of runway. Simple math, but easy to get wrong by using a non-representative burn figure. Trailing 3-month average is usually more accurate than most-recent-month.
Forward burn differs from historical burn when you have planned changes. If you are hiring 5 people in the next quarter, your forward burn will be higher than your trailing burn. Using trailing burn to forecast runway overestimates how long you can operate.
What investors really want to understand
When investors ask "what is your burn," they are testing several things. Do you know your numbers. Is the burn controlled and trending correctly. Is the burn justified by the growth it is producing. Is the runway enough to hit your next milestone. Each piece tells them something.
A good answer addresses all of these. "Current monthly net burn is $180K, up from $120K six months ago driven by engineering hiring. We have $4.2M in cash, giving us 23 months of runway. At current trajectory we hit our Series B metrics in 14-16 months."
A weak answer is just the number: "Our burn is $180K." That does not answer the implicit questions. Investors will keep probing. If you consistently have to be asked follow-ups, it signals you are not on top of your numbers.
The burn multiple
Burn multiple has become a standard efficiency metric: net burn divided by net new ARR. A company with $180K monthly burn and $120K in new ARR per month has a burn multiple of 1.5 - meaning $1.50 of burn per dollar of new ARR.
Good benchmarks: under 1x is excellent, 1-2x is healthy, 2-3x is acceptable for high-growth companies, 3x+ starts to raise questions. The benchmark varies by stage and business model, but these ranges are what sophisticated investors reference.
The burn multiple is more useful than absolute burn because it connects spending to growth produced. A company spending $300K to generate $200K in new ARR is more efficient than one spending $150K to generate $50K in new ARR, even though the second has lower absolute burn.
Managing the conversation
Have the numbers at fingertip. When an investor asks about burn, you should answer within seconds, with confidence, with context. Fumbling this question is a red flag no matter how good the business is. Practice until the answer is reflexive.
Know the trajectory, not just the current number. How has burn changed over the last 6 months? What caused the change? What is expected over the next 6 months? These are follow-up questions that come up 90% of the time.
Connect burn to milestones. Investors want to understand the mechanics of your capital use. "This burn funds hitting $5M ARR" is more useful than "This is our burn." Make the connection explicit so they can evaluate whether the burn is producing the right output.