Burn rate is the monthly pace at which a startup spends cash, split into gross burn (total outflow) and net burn (outflow minus revenue). Founders and investors must keep these two measurements separate. Net burn is the number that determines runway and gets the most investor attention; gross burn is the number that determines how exposed the company is if revenue stops.
The two numbers, with examples:
| Company state | Monthly expenses | Monthly revenue collected | Gross burn | Net burn |
|---|---|---|---|---|
| Pre-revenue | $150K | $0 | $150K | $150K |
| Early revenue | $150K | $50K | $150K | $100K |
| Growth stage | $400K | $300K | $400K | $100K |
| Approaching cash-flow neutral | $500K | $480K | $500K | $20K |
| Cash-flow positive | $500K | $550K | $500K | -$50K (cash growing) |
Why both numbers matt...