Burn Rate

Burn rate is how much cash a company consumes each month beyond what it brings in. Gross burn is total monthly spend, while net burn subtracts revenue and is the figure investors usually mean. Dividing cash in the bank by net burn gives runway, the number of months before the company must raise, cut costs, or reach breakeven. Runway is what turns burn rate into a decision, since a funding round takes months to close and teams generally start raising well before the money runs out. For AI startups the composition of burn has shifted. Compute for training and inference, together with senior research salaries, can dominate spending in a way that traditional SaaS payroll did not, and heavy use of a free tier raises burn as adoption grows. Cloud credits from providers such as AWS or Google Cloud mask this for a while and then expire. The pitfall is reading burn rate in isolation. High burn against fast, efficient growth is a different situation from the same number with flat revenue, which is why boards track burn multiple, the cash spent for each unit of new recurring revenue.