The Burn Multiple Prices Each New Dollar of ARR in Cash

The burn multiple, net burn divided by net new ARR, is the price a startup pays in cash for each dollar of new recurring revenue. Runway says how long the cash lasts; the multiple says how far it goes. At a steady multiple, closing the gap to a revenue milestone costs the multiple times the gap, whatever the burn rate.

The distinction matters more now that the milestones have moved. Carta’s data put the median wait between a seed round and a Series A at 616 days in the second quarter of 2025. One investor in Carta’s report now expects $5M to $10M of ARR at Series A (Carta, 2025). A runway plan has to clear both bars: enough months to wait, and enough cash, at the company’s own multiple, to cover the distance.

Burn rate, runway and the burn multiple measure different things, in different units

Measure	Formula	Unit	Question it answers	What it leaves out	Reference point
Gross burn	Cash paid out in a month	$ per month	How much does the company spend?	The cash it collects	None
Net burn	Cash out minus cash in from operations, excluding new funding	$ per month	How fast is the cash balance falling?	Whether the spending buys anything	None
Runway	Cash ÷ monthly net burn	Months	How long until the cash runs out at today’s burn?	Whether the company is closer to its next round when it does	Bessemer (2023): 12 months good, 18 better, 24 or more best
Burn multiple	Net burn ÷ net new ARR, same period	$ of cash per $ of ARR	What does each dollar of new ARR cost?	How long the ARR takes to arrive	Benchmarkit (2025 data): median 1.0, middle half 0.4 to 2.0, 62 companies
Reach	Cash ÷ burn multiple	$ of ARR	How much new ARR can the cash still buy?	Timing, and any change in the multiple	CX Cash’s term, defined below

Source: Sacks (2020) for the burn multiple; Bessemer Venture Partners for the runway formula and its 2023 bands; Benchmarkit (2026), read from its chart. Reach is CX Cash’s term.

Cash needed to reach an ARR milestone = burn multiple × (target ARR − current ARR) + buffer months × monthly net burn

The burn multiple turns runway from months into ARR

On 20 March 2000, ten days after the Nasdaq Composite peaked at 5,048.62 (Wired, 2010), Barron’s ran a cover story headlined “Burning Up”. Its warning was short: “For scores of ‘Net upstarts, that unpleasant popping sound is likely to be heard before the end of this year” (Willoughby, 2000). Once venture money dried up, in Wikipedia’s summary of the period, “A dot-com company’s lifespan was measured by its burn rate, the rate at which it spent its existing capital” (Dot-com bubble). The measure counted time and nothing else.

Twenty years later, as the economic crisis of spring 2020 deepened, David Sacks of Craft Ventures added a price. His burn multiple divides net burn by net new ARR to answer one question: “how much is the startup burning in order to generate each incremental dollar of ARR?” (Sacks, 2020). His opening paragraph tied it to runway: “Not only is it necessary to maximize runway, it also plays a larger role in how investors evaluate companies”.

The two measures come in different units. Runway is measured in months, while the next round’s bar is set in dollars of ARR. Burn rate converts a company’s cash into months; the burn multiple converts the same cash into ARR, and only that second conversion says whether the cash reaches the bar.

The conversion follows from the definition. Over any period, net burn equals the burn multiple times net new ARR, so closing an ARR gap costs the multiple times the gap, whether the money goes out quickly or slowly. Call it reach: the cash in the bank divided by the burn multiple, or the new ARR the money can still buy at today’s price. The rule breaks where the multiple itself moves, with scale and with the lag between spending and revenue, and the sections below take those up.

A hypothetical seed-stage software company has $1.0M of ARR and $8.0M in the bank, burns $400k a month and adds $1.6M of net new ARR a year. Its burn multiple is 3.0, the figure Sacks used for a seed-stage company that “just started selling”. Its runway is 20 months and its reach is $2.7M of ARR, so even spending its last dollar it would stop at about $3.7M of ARR. Against a $5M Series A bar, the $4M gap costs $12M at a multiple of 3, and $4M at Benchmarkit’s median of 1.0 for companies under $5M of ARR (our arithmetic).

Cutting burn buys months, and only a lower multiple buys ARR

Burn is therefore the first lever to test on a short runway, since it is the one a company controls most directly, and the identity shows what a cut can and cannot do. The table below runs four plans for the hypothetical company. In each, the raise starts when six months of cash remain, the buffer AirTree Ventures recommends: “Assume a cash buffer of ~6 months ahead of your raise” (AirTree).

Four runway plans for a hypothetical seed-stage company, $ thousands

Plan	Monthly net burn	Net new ARR a year	Burn multiple	Runway (months)	Reach	ARR when six months of cash remain	Short of a $5,000 bar
A. Today	400	1,600	3.0	20.0	2,667	2,867	2,133
B. Cut 25% across the board	300	1,200	3.0	26.7	2,667	3,067	1,933
C. Cut the 25% that adds no ARR	300	1,600	2.25	26.7	3,556	3,756	1,244
D. What a $5,000 bar requires	300	2,323	1.55	26.7	5,161	5,000	0

Hypothetical company with $1,000k of ARR and $8,000k of cash; the raise starts when six months of burn remain (AirTree’s buffer). All figures are our arithmetic.

Plan B, the across-the-board cut, adds 6.7 months of runway, a third more time, yet its reach is unchanged at $2.7M. When its raise starts, the company has $200k more ARR than under plan A, because the extra months are bought at the same price per dollar of ARR. Plan C removes the same $100k a month from spending that was producing no ARR; it gets the same months and arrives with $689k more ARR than plan B. Only plan D clears the bar, and the highest multiple the cash can afford is (8,000 − 6 × 300) ÷ 4,000, or about 1.55.

At least one investor reports seeing plan C’s kind of cut across a portfolio. Felix Hartmann of Hartmann Capital told Carta that “Most of our companies cut their burn in the last year”, and that “virtually all of them also increased their revenue”. Paul Graham made the general point in 2015: “In practice there is surprisingly little connection between how much a startup spends and how fast it grows” (Graham, 2015).

The tool for finding those cuts is the incremental multiple. AirTree’s example is a marketing push that added $0.5M of quarterly burn and $0.5M of new ARR, an incremental multiple of 1.0x against 2.5x for the quarter before. Ranking spend lines by the ARR each added per dollar shows which cuts lower the price and which only slow the clock. Choosing wrong has a measurable cost: plan B’s company starts its raise at month 20.7, close to Carta’s median wait, still $1.9M short of the bar.

But the multiple moves with scale and lags spending, so no plan can assume a fixed price

The multiple is not a constant, and the data show how far it moves. In Benchmarkit’s 2026 report, which covers 2025 for 62 companies, the median burn multiple was 1.0 and the middle half ran from 0.4 to 2.0 (Benchmarkit, 2026). By ARR band, the median was 1.0 under $5M, 1.3 at $5M to $20M, 1.0 at $20M to $50M and 0.5 at $50M to $100M. The report’s text says “Sub-$5M ARR companies show the highest Burn Multiple”. Its chart bears that out for the weaker half, where the 75th percentile reaches 2.4, while the median is no higher than at $20M to $50M. The sample is small and includes profitable companies.

Investors’ own datasets point the same way. ICONIQ, which measures the multiple on free cash flow and counts only unprofitable companies, finds that “top quartile companies tend to maintain burn multiples under 1.0x after scaling past $10M in ARR” (ICONIQ, 2025). Bessemer’s 2023 benchmark pairs growth with price: “The ideal growth profile for SaaS businesses looks like 100% Revenue Growth and a 1.2X Burn multiple” (Bessemer, 2023). Sacks’s own illustration ran from 3 at seed to 2 after the Series A.

The multiple also lags. Spending comes first and ARR follows a sales cycle later. After 2022 the cycle lengthened: Andreessen Horowitz reported in June 2023 that for some companies “it’s taking twice as long to get through the final pipeline stages” (a16z, 2023). A single quarter’s multiple therefore prices ARR that earlier spending bought, and a trailing twelve months is the fairer base. A plan that assumes the multiple falls from 3.0 to 1.5 on schedule doubles its reach on paper, from $2.7M to $5.3M. If the improvement arrives late, the raise starts short.

Runway is the length of the investor’s option, and accounting sets its floor

Runway is finite by design. Paul Gompers studied a random sample of 794 venture-backed firms and found that investors stage their money. Between rounds they gather information and “maintain the option to discontinue funding projects with little probability of going public” (Gompers, 1995). Each round buys a period of observation, and the next one is judged on the distance covered. Marcos Fernandez of Fiat Ventures told Carta that two or three years earlier, companies with less than $1M of ARR raised Series A rounds; today he might expect $5M or even $10M (Carta, 2025).

The time bar has moved too. Carta’s median of 616 days between seed and Series A is about 20.2 months. Add AirTree’s six-month buffer, and a company that has just raised its seed round needs about 26 months of runway to wait out the median. Bessemer’s 2023 bands rate 12 months of runway good, 18 better and 24 or more best, so waiting out the median now takes Bessemer’s best band.

Accounting sets a floor under the clock. Since 2016, US GAAP has required management to run a going-concern test for every annual and interim period. The test asks whether there is substantial doubt about the company’s ability to continue “within one year after the date that the financial statements are issued” (FASB, 2014). Substantial doubt exists when it is probable that the company will be unable to meet its obligations as they fall due within that year. For a company with audited accounts, less than 12 months of runway at the issue date makes substantial doubt a live question, unless management’s plans alleviate it.

Public filings rarely show the multiple. Only 37 filings on EDGAR contain the phrase, and 29 of them are annual reports from Gencor Industries, a maker of asphalt plants whose combustion systems can “burn multiple fuels, alternately or simultaneously” (Gencor, 2025). Veritone, an AI software company, is a rare filer that reports ARR each quarter beside its cash flows. In 2025 its ARR rose from $58.8M to $62.7M while its operating activities used $53.2M of cash, a burn multiple of about 13.6 (our arithmetic; Veritone, 2026).

Veritone ended the year with $27.4M of cash. At 2025’s operating burn, that is about 6.2 months of runway, and at its 2025 multiple a reach of about $2.0M of ARR (our arithmetic). Management concluded that there was substantial doubt about its ability to continue over the following twelve months, “principally driven by the maturity of our Convertible Notes, along with historical negative cash flows and recurring losses”. The comparison is rough. The ARR covers only the software business while the burn covers the whole company, and within that ARR the SaaS part fell by $1.05M as consumption grew by $5.0M. Even so, at that multiple an across-the-board cut could add months, while each dollar of new ARR would still cost about $13.60 of cash.

Bessemer’s Rule of X counts a point of growth as two of margin

The best case against pricing runway in ARR comes from Bessemer. Its Rule of X weights growth with a multiplier of “~2x for private companies and ~2-3x for public companies” against free cash flow margin (Deeter & Bondy, 2024). On that weighting, a company growing 30% with a 15% margin is worth more than one growing 15% with a 30% margin. Benchmarkit adds that a higher multiple at fast growth and with significant runway “may be a deliberate and rational investment strategy, not a warning signal”. Paul Graham notes who carries the risk of that strategy: “Kill-or-cure strategies are optimal for VCs because they’re protected by the portfolio effect.”

Deeter and Bondy are right that the date has a price. If a point of growth is worth about two points of margin, as their weighting assumes, reaching the same ARR sooner is worth money. The burn rate is the lever that sets the date. When the multiple is low, burning faster to arrive sooner can be the better choice, which is why Bessemer’s ideal profile pairs 100% growth with a multiple of 1.2.

On price, their own firm concedes the ground. Bessemer sets the Rule of X aside for early-stage companies with negative free cash flow, where “we still think in terms of the business achieving an attractive burn multiple (ideally ~1x-1.5x)”. Its own example compares two companies with the same Rule of X, at multiples of about 2x and 3x, and concludes that “most companies would choose the profile of Company A”. Speed raises the value of each dollar of ARR without lowering its cost, so at 3x a faster burn brings the shortfall forward instead of closing it. Sacks put the same point drily: “A startup that over-burns is effectively claiming that its sales will be spring-loaded.”

Report reach beside runway, and cut where ARR costs the most

• Reach, every month. Founders should report it next to runway: cash divided by the trailing twelve-month burn multiple, net of churn, as Sacks defines it. Boards should ask for it, and for the ARR the company expects to have when six months of cash remain.
• The next round, priced in ARR before months. The highest multiple the cash can afford is (cash − buffer months × monthly burn) ÷ ARR gap; if today’s multiple is above it, more months will not close the gap.
• Cuts ranked by incremental multiple. Rank spend lines by the ARR each added per dollar, and cut from the most expensive rather than by percentage. A board shown a proposed cut should ask what ARR the cut spending was producing.
• One written definition. Net burn or free cash flow (ICONIQ uses the latter), one quarter or a trailing year, net or gross new ARR: investors should ask which.
• A falling multiple, tested each quarter. A plan that assumes the multiple falls on schedule is a forecast to check against actuals. Under $5M of ARR, Benchmarkit’s middle half runs from 0.8 to 2.4.
• Net new ARR by month. Track it in the SaaS KPI dashboard and ARR growth tracker below; it is the denominator of both measures.

The multiple decides whether a runway reaches the Series A

Runway tells a board how long a company can wait, and the burn multiple tells it how far the wait will take it. At a constant multiple, a cut buys months and leaves the distance unchanged, so the burn rate decides only when the company finds out whether it will arrive. With the median seed-to-Series A gap above 600 days and one investor quoting a Series A bar of $5M of ARR or more, the multiple decides whether a runway reaches the round. For the hypothetical company at a multiple of 3.0, the $4M gap to that bar costs $12M, half as much again as the $8M it holds.

References

• AirTree Ventures. The Burn Multiple: what is it, how to calculate it and benchmarks (Open Source VC series).
• Andreessen Horowitz (Immerman, A. and Wang, S.) (2023). The 2022 Effect: A Benchmarking Bulletin, 5 June.
• Benchmarkit (2026). 2026 SaaS and AI Metrics Benchmarks, 1 June.
• Bessemer Venture Partners (2023). State of the Cloud 2023, 11 April; and The five accounting metrics for cloud companies.
• Deeter, B. and Bondy, S. (2024). The Rule of X. Bessemer Venture Partners, 2 January.
• Dowd, K. (2025). ‘Quantity is down, and quality is up’: the new state of Series A fundraising. Carta, 19 September.
• Financial Accounting Standards Board (2014). Accounting Standards Update 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40).
• Gencor Industries (2025). Form 10-K for the fiscal year ended 30 September 2025.
• Gompers, P. A. (1995). Optimal investment, monitoring, and the staging of venture capital. Journal of Finance 50(5), 1461–1489.
• Graham, P. (2015). Default Alive or Default Dead? paulgraham.com, October.
• ICONIQ Analytics (2025). State of Software 2025: Rethinking the Playbook, September.
• Long, T. (2010). March 10, 2000: Pop goes the Nasdaq! Wired, 10 March.
• Sacks, D. (2020). The Burn Multiple. Craft Ventures, reposted on Bottom Up, 23 April.
• US Securities and Exchange Commission. EDGAR filings containing “burn multiple”, as of 3 October 2026.
• Veritone, Inc. (2026). Form 10-K for the fiscal year ended 31 December 2025.
• Wikipedia. Dot-com bubble.
• Willoughby, J. (2000). Burning Up. Barron’s, 20 March.

The figures come from the reports, filings and articles above, and Benchmarkit’s quartile and band values are read from its charts. Unlabelled figures in the worked example, the runway bars and the Veritone comparison are computed from those cited numbers. The company in the four runway plans is hypothetical, and reach is CX Cash’s term.