The Most Important Metric for Founders
In the startup world, "Burn Rate" is the speed at which your company is losing money. It is the distance between your monthly expenses and your monthly revenue. If you aren't profitable, your burn rate is the ticking clock that tells you when your company will die.
Gross Burn vs. Net Burn
- Gross Burn: The total amount of cash your company spends every month (salaries, rent, AWS, etc.).
- Net Burn: The total cash lost (Gross Burn - Revenue). This is the number that actually drains your bank account.
Runway Calculation
If you have $500,000 in the bank and your Net Burn is $25,000 per month, you have 20 months of "Runway." This means you have exactly 20 months to either become profitable or raise more capital.
Managing the Burn
A high burn rate isn't necessarily bad if it's driving high growth. However, in 2026, venture capitalists are looking for "Default Alive" companies—those that can reach profitability before their runway ends. Monitoring your burn rate weekly is essential for survival.
Conclusion
Don't wait until you have 3 months of cash left to make a change. Use our Startup Runway calculator to model different hiring and revenue scenarios to keep your company healthy.