Burn rate refers to how fast a company is consuming its cash. Gross burn is total monthly operating expenditure. Net burn is gross burn minus monthly revenue — it is net burn that determines runway. Both metrics matter: gross burn reveals operating cost structure, while net burn reveals how close the company is to cash flow breakeven.
A high burn rate is not necessarily bad; it is bad relative to the value being generated. A company burning $500K per month to generate $300K MRR and growing 20% month-on-month is burning strategically. A company burning $200K per month with flat revenue and no clear path to acceleration is burning poorly. Investors evaluate burn not in isolation but against revenue growth, team size, and the credibility of the plan for capital deployment.
Burn rate discipline is particularly important in the current market environment, where the capital availability and valuation assumptions of 2021 have permanently reverted. Investors now routinely ask for detailed burn schedules, headcount plans, and sensitivity analysis. Founders who can demonstrate that their burn is thoughtfully allocated to specific growth experiments — rather than diffuse overhead — build more trust during due diligence.