Burn Rate
The rate at which a company spends its cash reserves in excess of revenue, typically measured monthly, determining how long the company can operate before needing additional funding or reaching profitability.
Burn rate is the cash consumed per month. Gross burn is total monthly spending. Net burn is monthly spending minus monthly revenue. A company spending $500K/month with $200K/month revenue has a net burn of $300K/month. This metric determines your runway and creates urgency around either revenue growth or fundraising.
For growth teams, burn rate creates a strategic constraint. Every experiment, hire, and campaign must be evaluated against the burn rate clock. High burn rates demand faster payback periods and more efficient acquisition. The growth team's job is to generate revenue growth that eventually exceeds burn, creating a path to profitability or demonstrating momentum for the next funding round.
The optimal burn rate depends on stage and market conditions. In bull markets with cheap capital, burning more to grow faster can be rational. In tighter markets, capital efficiency matters more. The discipline is ensuring that burn converts to durable growth: burning $1M/month but acquiring customers with 24-month payback and strong retention is building value. Burning $1M/month but acquiring customers who churn in 3 months is destroying capital.
Related Terms
Growth Loop
A self-reinforcing cycle where each cohort of users generates inputs (data, content, referrals) that attract the next cohort, creating compounding growth.
Churn
The rate at which customers stop using or paying for a product over a given period, typically measured as monthly or annual churn percentage.
Activation Rate
The percentage of new signups who complete a key action (the 'aha moment') that correlates with long-term retention and product value realization.
Product-Led Growth (PLG)
A go-to-market strategy where the product itself drives acquisition, activation, and expansion through self-serve experiences rather than sales-led motions.
Viral Coefficient (K-Factor)
The average number of new users each existing user brings to the product, where a K-factor above 1.0 indicates self-sustaining viral growth.
Net Revenue Retention (NRR)
The percentage of recurring revenue retained from existing customers over a period, including expansion, contraction, and churn — where 100%+ indicates growth without new customers.