Burn Rate
The rate at which a company spends its available cash, typically measured on a monthly basis.
Definition
Burn rate represents how quickly a startup is using up its cash reserves to fund operations. It's a critical metric for understanding how long a company can operate before needing additional funding or reaching profitability.
Why It Matters
- Survival Metric: Determines how long your startup can operate
- Investor Concern: High burn rates signal need for funding or efficiency improvements
Real-World Example
Tech Startup: Monthly expenses of $50,000 with $10,000 monthly revenue
Net Burn Rate = $50,000 - $10,000 = $40,000/month