Corporate FinanceFinancial Glossary
Burn Rate
Definition
The rate at which a startup or company spends its cash reserves, typically measured monthly. Gross burn rate is total monthly cash outflow. Net burn rate subtracts monthly revenue from monthly expenses. A startup spending Rs 30 lakh per month with Rs 10 lakh in revenue has a net burn rate of Rs 20 lakh per month.
Why It Matters
Burn rate determines how long a startup can survive before it needs to raise more capital or become profitable. Combined with the cash balance, it gives you the runway. Investors scrutinize burn rate efficiency — a startup burning Rs 50 lakh per month to generate Rs 5 lakh in revenue is far less capital-efficient than one burning Rs 20 lakh for the same revenue.