What is burn multiple?
Burn multiple is net cash burned divided by net new ARR. It shows how much cash a company spends to add each dollar of annual recurring revenue. David Sacks, co-founder of Craft Ventures, introduced it in an April 2020 essay as a measure of capital efficiency. The lower the multiple, the more efficiently the company is growing.
Why it matters to a revenue leader
Burn multiple puts sales efficiency and company spending into one number, which is why investors check it closely at growth rounds. It penalizes growth bought with heavy spending and rewards growth from retention and expansion. A revenue leader should track it next to quota attainment, since churn and slow ramps raise it as surely as overspending does.
How to calculate it
Burn multiple = Net burn / Net new ARR, for the same period. Net new ARR is new plus expansion ARR minus churned ARR.
Common mistake: using gross new bookings, which hides churn and makes the multiple look better than it is.
Example
Fictitious numbersIn one quarter, a company burns $3 million and adds $2 million in new and expansion ARR while losing $500,000 to churn. Net new ARR is $1.5 million, so the burn multiple is 2.0. Cutting churn in half would bring it down to about 1.7.
"What is our burn multiple this quarter, and how much of it comes from churn?"
Sources
- The Burn Multiple checked 9 Oct 2026
- Burn Multiple - How to Measure Capital Efficiency in SaaS checked 9 Oct 2026