Burn Rate Calculator
Calculate startup burn rate and runway from monthly expenses and remaining cash. Enter values for instant results with step-by-step formulas.
Calculator
Adjust values & calculateCash Projection
Formula
Net burn rate represents the actual monthly cash depletion after accounting for revenue. Runway is calculated by dividing the total available cash by the net burn rate, giving the number of months before the company runs out of money.
Last reviewed: January 2026
Worked Examples
Example 1: Early-Stage SaaS Startup
Example 2: Post-Series A Company
Background & Theory
The Burn Rate Calculator applies the following established principles and formulas. Finance and investing rest on the foundational concept of the time value of money: a dollar received today is worth more than a dollar received in the future, because present funds can be deployed to earn a return. This principle underlies virtually every valuation technique in modern finance. The future value of a present sum P growing at rate r over n periods is expressed as FV = P(1 + r)^n, while the present value of a future cash flow FV is PV = FV / (1 + r)^n. Compound growth amplifies returns significantly over long horizons, a dynamic often described as the eighth wonder of the world. Net Present Value (NPV) extends these mechanics to evaluate investment projects by summing the present values of all expected cash flows minus the initial outlay: NPV = sum[CF_t / (1 + r)^t] - C_0. A positive NPV indicates the project creates value above the required return. The Internal Rate of Return (IRR) is the discount rate that sets NPV to zero, providing a single percentage benchmark for project comparison. The risk-return tradeoff is the central tension of investment theory. Higher expected returns generally require accepting greater uncertainty. Harry Markowitz formalized this in Modern Portfolio Theory by demonstrating that portfolio variance can be reduced through diversification when assets are imperfectly correlated. The efficient frontier represents the set of portfolios offering the maximum return for a given level of risk. The Capital Asset Pricing Model (CAPM) extends this by introducing the market portfolio as a reference, defining expected return as E(r) = r_f + beta * (E(r_m) - r_f), where beta measures an asset's sensitivity to systematic market risk. Asset classes — equities, fixed income, real assets, and alternatives — differ in their return profiles, liquidity, and correlations. Strategic asset allocation determines long-run target weights based on investor objectives and risk tolerance, while tactical allocation permits short-run deviations to exploit perceived mispricings. Discount rates used in valuation models must reflect the cost of capital appropriate to the risk of the cash flows being discounted, a point stressed in corporate finance texts from Brealey, Myers, and Allen through to Damodaran.
History
The history behind the Burn Rate Calculator traces back through the following developments. The formal practice of lending at interest dates to ancient Mesopotamia, where the Code of Hammurabi around 1750 BCE regulated interest rates on grain and silver loans. Banking as an institutional activity took root in medieval Italy, with merchant bankers in Florence and Venice financing trade across Europe through instruments such as bills of exchange. The Medici family operated one of the most sophisticated banking networks of the fifteenth century, pioneering double-entry bookkeeping and correspondent banking relationships. Organized equity markets emerged in the early seventeenth century. The Dutch East India Company (VOC), chartered in 1602, issued shares to the public and created the Amsterdam Stock Exchange — widely regarded as the world's first formal stock exchange. The VOC allowed investors to buy and sell shares freely, establishing the template for the joint-stock company. The period also produced the Dutch tulip mania of 1636 to 1637, one of history's first recorded speculative bubbles, in which tulip bulb futures contracts reached extraordinary prices before collapsing. England's financial revolution followed in the late seventeenth century with the founding of the Bank of England in 1694 and the development of government bond markets. The South Sea Bubble of 1720 illustrated the dangers of speculative excess and contributed to early securities regulation. Throughout the eighteenth and nineteenth centuries, industrialization created enormous demand for capital, fueling the expansion of stock exchanges in London, Paris, New York, and beyond. The New York Stock Exchange, formalized in 1817, became the world's dominant equities market by the twentieth century. The Great Crash of 1929 and subsequent Great Depression prompted the US Securities Act of 1933 and Securities Exchange Act of 1934, establishing the SEC and mandatory disclosure requirements. Harry Markowitz published his landmark portfolio selection paper in 1952, launching quantitative finance. The CAPM emerged in the 1960s through work by Sharpe, Lintner, and Mossin. John Bogle launched the first retail index fund in 1976, democratizing diversified investing and challenging active management orthodoxy.
Frequently Asked Questions
Formula
Net Burn = Expenses - Revenue | Runway = Cash / Net Burn
Net burn rate represents the actual monthly cash depletion after accounting for revenue. Runway is calculated by dividing the total available cash by the net burn rate, giving the number of months before the company runs out of money.
Worked Examples
Example 1: Early-Stage SaaS Startup
Problem: A seed-stage startup has $750,000 in the bank, earns $15,000/month in revenue, and spends $65,000/month. Calculate burn rate and runway.
Solution: Gross Burn Rate = $65,000/month\nNet Burn Rate = $65,000 - $15,000 = $50,000/month\nRunway = $750,000 / $50,000 = 15 months\nDaily Burn = $50,000 / 30 = $1,667/day\nRevenue needed to break even = $65,000/month
Result: Net Burn: $50,000/mo | Runway: 15 months | Break-even revenue: $65,000/mo
Example 2: Post-Series A Company
Problem: A Series A startup has $2,000,000 in cash, $80,000/month revenue, and $180,000/month in expenses. How long until they need more funding?
Solution: Gross Burn Rate = $180,000/month\nNet Burn Rate = $180,000 - $80,000 = $100,000/month\nRunway = $2,000,000 / $100,000 = 20 months\nAnnual Burn = $100,000 x 12 = $1,200,000/year
Result: Net Burn: $100,000/mo | Runway: 20 months | Annual Burn: $1,200,000
Frequently Asked Questions
What is burn rate and why does it matter for startups?
Burn rate measures how quickly a startup spends its available cash reserves over a given period, typically expressed as a monthly figure. Gross burn rate is total monthly spending regardless of revenue, while net burn rate subtracts any revenue earned from total expenses. This metric is critical because it determines how long a company can survive before running out of money or needing additional funding. Investors closely examine burn rate when evaluating startups because it reveals operational efficiency and financial discipline. A high burn rate relative to available cash signals urgency for fundraising or revenue growth.
What is the difference between gross burn rate and net burn rate?
Gross burn rate is the total amount of money a company spends each month on all operating expenses combined, including salaries, rent, marketing, and every other cost category. Net burn rate accounts for incoming revenue by subtracting monthly revenue from gross burn, showing the actual cash depletion per month. For example, if a startup spends $80,000 monthly but earns $30,000, the gross burn is $80,000 and the net burn is $50,000. Pre-revenue startups will have identical gross and net burn rates since there is no revenue to offset expenses. As revenue grows, net burn decreases, and when revenue exceeds expenses the company achieves profitability.
How can a startup reduce its burn rate quickly?
The fastest ways to reduce burn rate include renegotiating vendor contracts, pausing non-essential hiring, cutting discretionary spending like travel and perks, and switching to more affordable tools and services. Payroll is typically the largest expense at 60 to 80 percent of total costs, so evaluating team size and compensation structure can have the biggest impact on burn reduction. Some startups shift employees to part-time or contract arrangements during cash crunches to preserve runway without full layoffs. Subleasing unused office space, moving to remote work, and reducing marketing spend to focus only on highest-ROI channels are also common tactics that can be implemented quickly.
What is a healthy burn rate for different startup stages?
Pre-seed and seed-stage startups typically burn between $20,000 and $80,000 per month, primarily on a small founding team and basic infrastructure costs. Series A companies often burn $100,000 to $300,000 monthly as they scale their team and invest in growth channels to capture market share more aggressively. Series B and beyond can see burn rates of $500,000 to over $2 million monthly depending on the industry and growth strategy being pursued. The key metric is not the absolute burn rate but the ratio of burn to growth rate achieved with that spending. A startup burning $200,000 monthly but growing revenue 20 percent month-over-month is in a much better position than one burning $50,000 with flat revenue.
How does burn rate affect fundraising and valuation?
Burn rate directly impacts how much time founders have to close a funding round and significantly influences investor perception of the company overall. High burn rates without corresponding growth metrics can scare away investors who see it as poor financial management and wasteful spending of capital. Conversely, a lean burn rate with strong growth signals efficiency and good stewardship of investor money to potential backers evaluating the deal. When fundraising, investors calculate your runway to determine urgency and may use shorter timelines as leverage in negotiations for better terms. Startups with longer runway can afford to be more selective, often securing better terms and higher valuations.
What expenses are included in burn rate calculations?
Burn rate includes all cash outflows from operations during a given period, covering every type of recurring business expenditure the company incurs on a monthly basis. This encompasses employee salaries, benefits, and payroll taxes, which typically represent 60 to 80 percent of total burn for technology startups in particular. Office rent, utilities, facility costs, software subscriptions, cloud hosting fees, and technology infrastructure expenses are all counted in the total burn rate figure. Marketing and advertising spend, legal and accounting fees, insurance premiums, and travel expenses all contribute to the total burn figure as well. Capital expenditures like equipment purchases are sometimes counted separately, but for most startup analysis all cash expenditures are included.
References
Reviewed by Sahil, Senior Finance & Tax Editor · Editorial policy