Burn Multiples Are a Way of Managing Growth Efficiently

A burn multiple is the amount of cash burned by annual recurring revenue (ARR). For example, if a company burns $10MM to add $30MM ARR the burn multiple is 3.0x. Higher burn multiples are worse and imply the company will run out of money faster. This is a better measure of overall efficiency compared to LTV/CAC because it encompasses all costs (burn).

What’s a good burn multiple? (Source a16z)

ARR 25th Percentile (Bad) 50th Percentile (Median) 75th Percentile (Good)
$0-$10MM 3.8x 1.6x 1.1x
$10MM-$25MM 1.8x 1.4x 0.8x
$25MM-$75MM 1.1x 0.7x 0.5x
$75MM+ 0.9x 0.5x 0x

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