What inputs does the Burn Multiple Calculator need?

It takes 2 inputs: netBurn, netNewArr. Outputs returned: burnMultiple, grade.

What formula does the Burn Multiple Calculator use?

The exact computation is: burn_multiple = net_burn / net_new_arr

Can I verify the Burn Multiple Calculator with a worked example?

Yes. With netBurn = $500,000, netNewArr = $250,000. the tool returns burn_multiple = 2.0 (suspect).

Where does the Burn Multiple Calculator get its benchmark data?

Reference data is sourced from: SaaS Capital Annual Survey (capital efficiency percentiles) (as of 2024).

What can the Burn Multiple Calculator not tell me?

Known limitations: Grade bands are editorial (Sacks 2020 Substack essay), not peer-reviewed. Meaningless at seed stage where ARR is small and volatile.

Methodology: Burn Multiple Calculator

1. Scope

Computes burn multiple (net burn / net new ARR) to gauge capital efficiency. A venture-stage metric popularised by David Sacks.

2. Inputs and outputs

Inputs

netBurn number (currency)
netNewArr number (currency)

Outputs

burnMultiple

netBurn / netNewArr.
grade

< 1 amazing, 1–1.5 great, 1.5–2 good, 2–3 suspect, > 3 bad (Sacks heuristic).

Engine source: src/lib/burn-multiple-calculator/engine.ts

3. Formula / scoring logic

burn_multiple = net_burn / net_new_arr

4. Assumptions

Net new ARR is new + expansion − contraction − churn, not gross new.
Net burn is cash burn net of revenue, not gross burn.

5. Data sources

SaaS Capital Annual Survey (capital efficiency percentiles) as of 2024

6. Known limitations

Grade bands are editorial (Sacks 2020 Substack essay), not peer-reviewed.
Meaningless at seed stage where ARR is small and volatile.

7. Reproducibility

Input
netBurn = $500,000, netNewArr = $250,000.

Expected output
burn_multiple = 2.0 (suspect).

8. Change log

2026-04-24 methodology page first published.

Worked example

Run live against the same engine this site ships (/engines/burn-multiple-calculator.js). The inputs and outputs below are recomputed on every build and independently re-verified in CI — they are never hand-authored.

Input

tool: burn_multiple
net_burn_monthly: 100000
net_new_arr_monthly: 50000

Output

burnMultiple: 2
verdict: Good. Reasonable burn efficiency.
annualBurn: 1200000
annualNetNewArr: 600000

Frequently asked questions

What does the Burn Multiple Calculator calculate?: Computes burn multiple (net burn / net new ARR) to gauge capital efficiency. A venture-stage metric popularised by David Sacks.
What inputs does the Burn Multiple Calculator need?: It takes 2 inputs: netBurn, netNewArr. Outputs returned: burnMultiple, grade.
What formula does the Burn Multiple Calculator use?: The exact computation is: burn_multiple = net_burn / net_new_arr
Can I verify the Burn Multiple Calculator with a worked example?: Yes. With netBurn = $500,000, netNewArr = $250,000. the tool returns burn_multiple = 2.0 (suspect).
Where does the Burn Multiple Calculator get its benchmark data?: Reference data is sourced from: SaaS Capital Annual Survey (capital efficiency percentiles) (as of 2024).
What can the Burn Multiple Calculator not tell me?: Known limitations: Grade bands are editorial (Sacks 2020 Substack essay), not peer-reviewed. Meaningless at seed stage where ARR is small and volatile.