Burn Multiple Calculation
A startup with net losses of $200,000 and revenue growth of $100,000 has a Burn Multiple of 2.
- net_losses:
- 200000
- revenue_growth:
- 100000
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Fundraising★ Essential⚗ Includes simulator
Burn Multiple
Ratio of net losses to revenue growth.
Deep dive
The Burn Multiple measures how efficiently a startup uses its capital to generate revenue. A high Burn Multiple indicates potential inefficiency in fund utilization. It differs from the simple burn rate, which doesn't account for revenue growth.
Key formula
Burn Multiple = Net Losses / Revenue Growth
Real-world examples
Pitfalls to avoid
- Ignoring seasonal variations in revenue.
- Not adjusting for one-time expenses.
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