Burn multiple

David Sacks introduced the metric as Burn Multiple = Net Burn ÷ Net New ARR, arguing that the more a startup burns to achieve each unit of growth, the less efficient it is.¹Source 1 · David Sacks, Bottom Up (Craft Ventures), 2020The Burn Multiplesacks.substack.com Because it uses net new ARR, it captures everything at once: acquisition efficiency, expansion, churn and the overhead that is not sales and marketing at all.

In the original post, Sacks describes a 2x burn multiple as reasonable for an early-stage startup and 5x as terrible, and warns that needing 3x or more may point to a product-market fit problem.¹Source 1 · David Sacks, Bottom Up (Craft Ventures), 2020The Burn Multiplesacks.substack.com Early companies with tiny ARR bases swing wildly, so read the multiple on a trailing basis and alongside CAC payback and NRR, which explain why it moved.

• Using gross burn. Collections from customers reduce net burn; ignoring them overstates the multiple.
• Using bookings instead of ARR. A multi-year prepaid deal boosts cash and bookings but adds only its annual value to ARR.
• Measuring monthly. Single months are noisy; quarters or trailing six months give a stable read.
• Hiding one-offs. If a large annual prepayment lands in the quarter, show the multiple with and without it.

Connect your accounting system (QuickBooks or Xero) for cash movements and Stripe for the ARR bridge. Kimo computes net burn and net new ARR in one model so the periods always align, charts the trailing multiple in the board deck template, and can draft the commentary in Board decks. Our longer explainer, Burn multiple explained, walks through edge cases.