What is Burn rate? Definition, Formula & Benchmarks

What is burn rate?

Burn rate is how much cash a startup spends each month to operate. Gross burn is your total monthly cash outflow; net burn subtracts the cash coming in from revenue. Burn rate, paired with your bank balance, sets your runway, how long you can operate before raising again.

Formula

Net Burn = Monthly Cash Out − Monthly Cash In

Cash OutAll cash leaving the business that month
Cash InRevenue actually collected that month

Worked example

A startup spending $120,000 a month while collecting $40,000 in revenue has a net burn of $80,000, the amount its bank balance drops each month. Its gross burn is the full $120,000, before any revenue is counted.

Benchmarks by stage

There is no universal right number, but a common guardrail is to keep net burn low enough to preserve 12–18 months of runway between raises. Seed-stage startups often run roughly $50K–$150K per month, climbing with headcount at Series A.

Source: Common seed–Series A VC guidance (2025)

Why it matters for fast-growing companies

Burn rate turns an abstract bank balance into a countdown. Every hiring plan, growth experiment, and fundraising timeline is really a decision about burn. Investors read your burn against your growth to judge whether you are spending to build or just spending.

Frequently asked questions

What is the difference between gross and net burn?+

Gross burn is all the cash you spend in a month. Net burn subtracts the cash you bring in, so it is your true monthly cash loss. Investors usually mean net burn when they ask about your burn rate.

Is a high burn rate bad?+

Not by itself. A high burn rate is fine if it is buying proportional growth and you hold enough runway. It becomes a problem when spend outpaces results or leaves you with under about 12 months of cash before the next raise.

Burn rate