The Metric Investors Ask For That You've Never Calculated

It's 4:40 on a Tuesday. You're twenty minutes into a call with an investor you actually like, and she's been generous with her time. Then she asks it, casually, the way you'd ask about the weather.

"What's your burn multiple?"

You know your burn. You know your growth. You've said both out loud, with confidence, for months.

You've just never said them in the same sentence.

What it actually is

The burn multiple is net burn divided by net new ARR. For every dollar of new recurring revenue you added, how many dollars did you spend getting it? David Sacks of Craft Ventures popularized the metric, and Kruze Consulting's write-up defines it the same way: net cash burned over net new ARR.

Say you burned $600K last quarter and added $300K of net new ARR. That's a 2.0x. Two dollars out the door for every dollar of recurring revenue that stuck.

Is that good? Is it bad? Depends on your size, and that's the point.

What "good" looks like

Kruze's rule of thumb is that decent burn multiples sit under 2x and the best sit under 1x. Their write-up also reproduces an Andreessen Horowitz framework for companies with $0 to $10M in ARR: 3.8x is bad, 1.6x is OK, and 1.1x is good. Scale Venture Partners' 2022 analysis of several hundred SaaS companies found an average of about 1.6x across the whole lifecycle, and 3.4x for companies under $1M in ARR.

Read that last number again. If you're early, 3.4x isn't a scandal. It's Tuesday.

Burn tells you how long you have. Burn multiple tells an investor what you're doing with it.

Why you've never calculated it

Because the two numbers live in two different places. Burn lives in your books. Growth lives in your billing system, or your CRM, or (let's be honest) your head.

And "net new ARR" is doing a lot of quiet work. It means new customers, plus expansion, minus churn and downgrades. It means deciding whether that annual prepay counts the way you think it does. It means using the same definition in March that you used in December, so the trend means something.

None of that is hard to understand. All of it is hard to do consistently, every month, while you're also running the company. That's why most founders meet this number for the first time live, on a call, with someone waiting.

Do it before she asks

Calculate it once, this week, with whatever definitions you can defend. Then do it again next month with the same ones. The first number tells you where you are. The second tells you which way you're moving, and that's the part an investor really wants.

And if the number is ugly? Know it first. Walk in with the number and the story behind it. Walking in without either is the only version that's actually bad.

We should be straight about where we fit. MyRunwayHealth doesn't build investor materials. What it does is show your runway in months and your burn, with QuickBooks Online or Puzzle connected, which is where the top half of this fraction starts. The bottom half is on you (we know, we know).

Final thoughts

It's not a vanity metric. It's not a trick question. It's not something you need an MBA to ask yourself.

It's two numbers you already have, finally standing next to each other.

And if you get there before the call instead of during it? That's when the question stops being a pop quiz and starts being a conversation. You're already further along than you think.