What is burn rate?
Burn rate is the speed at which your startup is spending cash, usually expressed as a monthly number. If your monthly burn rate is $50,000, you are spending $50,000 per month on the things that keep the business alive: salaries, rent, infrastructure, marketing, and tools.
A burn rate calculator turns your line-item costs into a single monthly number that you can plug into a runway calculator to figure out how long your cash will last.
Gross burn vs net burn
Founders use the term “burn rate” loosely. Investors are much more precise. There are two definitions you need to know:
- Gross burn is total monthly cash outflow, ignoring revenue. It tells you how much it costs to keep the lights on.
- Net burn is gross burn minus revenue. It tells you how much cash you actually lose each month, and it is the number you use to calculate runway.
Always specify which you mean. If an investor asks for your burn rate, they probably mean net burn, but pitch decks often quote gross burn because it sounds smaller relative to revenue.
The burn rate formula
Both formulas are simple:
gross burn = sum of monthly cash outflows
net burn = gross burn - monthly revenueFor a more accurate read on a noisy month, use a three-month rolling average rather than the latest month. One bad month (a quarterly tax bill, a deposit on office space) can otherwise distort the number.
A worked example
Imagine a seed-stage SaaS startup with the following monthly cash flows:
| Line item | Monthly amount |
|---|---|
| Salaries (5 people) | $70,000 |
| Cloud infrastructure | $8,000 |
| SaaS tools | $3,500 |
| Marketing | $5,000 |
| Rent and admin | $3,500 |
| Gross burn | $90,000 |
| Monthly recurring revenue | ($25,000) |
| Net burn | $65,000 |
With $1.2M in the bank, this startup has $1,200,000 / $65,000 = about 18 months of runway. Healthy for a seed-stage team, with enough room to start the next fundraise around month 9.
What is a healthy burn rate by stage?
Burn rate alone is not a red flag or a green flag. The right question is: is the burn justified by the progress?
| Stage | Typical net burn | Team size |
|---|---|---|
| Pre-seed | $15k to $40k / month | 1 to 3 |
| Seed | $40k to $120k / month | 3 to 8 |
| Series A | $200k to $600k / month | 10 to 30 |
These are rough ranges. A capital-efficient B2B startup might burn half of these numbers. A consumer or hardware company might burn double.
How to reduce your burn rate
- Audit your SaaS bill. Most teams pay for 30% they don't use. Cancel inactive seats and tools.
- Right-size cloud spend. Reserved instances, shutting down unused environments, and switching cheaper regions often cuts cloud costs by 20 to 40%.
- Slow hiring. One unfilled senior role is often a full month of runway. Push the must-fill bar higher.
- Switch contractors to outcome-based pricing. Hourly tends to balloon. Fixed-fee per milestone keeps spend predictable.
- Renegotiate annual contracts. Vendors will discount 10 to 20% to keep a paying customer.
From burn rate to runway
Once you know your monthly net burn, calculating runway is one division: cash on hand divided by net burn. We cover the formula, worked examples, and healthy ranges by stage in the startup runway calculator guide.
A free burn rate calculator built for founders
RocketRunway is a runway and burn rate calculator built for early-stage founders. Add your line items, set growth assumptions on each, and the chart updates instantly. Compare two to four scenarios on one chart so you can see what cutting infrastructure spend or delaying a hire would actually do to your runway.
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Burn rate FAQ
What is burn rate?
Burn rate is the speed at which a startup spends cash. It's typically expressed as a monthly figure. Gross burn is total monthly expenses; net burn is gross burn minus monthly revenue.
What is a healthy burn rate for a startup?
Healthy varies by stage and runway. A common rule of thumb: monthly net burn should leave you with 12+ months of runway after each fundraise, and you should start the next raise with at least 6 months remaining. Pre-seed: under $50k/mo is typical. Seed: $50k–$200k/mo. Series A: $200k–$500k/mo.
How is burn rate different from runway?
Burn rate is monthly cash outflow (a rate). Runway is how many months your current cash lasts at that rate (a duration). Runway = cash balance ÷ net burn.
Why is my net burn higher than my gross burn?
It shouldn't be - net burn is gross minus revenue, so net ≤ gross. If you're seeing the opposite in a spreadsheet, you've likely got a sign error or are subtracting expenses from revenue twice.
Should I use gross burn or net burn for runway?
Use net burn. Gross burn ignores the revenue offset and underestimates how long your cash lasts. If your revenue is volatile, run two scenarios - one with conservative revenue, one with current - and compare runway in both.
How often should I track burn rate?
Monthly at minimum. Update after every hire, every meaningful contract, and whenever revenue assumptions change. The point of a burn rate model is to inform decisions; stale numbers misinform.