Metrics & Performance
Net Burn
The actual cash a company loses each month after accounting for all incoming revenue — total monthly expenses minus total monthly revenue.
Net Burn = Total Monthly Cash Out - Total Monthly Cash In
Net burn is distinct from gross burn (total cash spent regardless of revenue). A company spending $500K/month with $200K in revenue has a $300K net burn and $500K gross burn. Net burn determines actual runway: $3M in the bank at $300K net burn = 10 months.
Net burn is the most operationally relevant survival metric for a startup. Founders should know their net burn to the dollar.
In Practice
A Series A company has $5M in the bank. Monthly expenses: $600K. Monthly revenue: $150K. Net burn: $450K/month. Runway: $5M / $450K ≈ 11 months. This means fundraising should start within 5 months to avoid running out of runway mid-raise.
Why It Matters
Founders who don't track net burn precisely find themselves in desperate fundraising situations with 3-4 months of runway — a terrible negotiating position. Sophisticated investors always ask for current net burn and 6-month trend.