Formula
burn multiple = net burn / net new ARR
Burn multiple
Burn multiple is the amount of cash a company burns to add one unit of new annual recurring revenue, and it measures capital efficiency in a single ratio.
Worked example
Burning €300,000 in a quarter while adding €200,000 of net new ARR gives a burn multiple of 1.5: €1.50 spent per recurring euro gained.
Benchmark
Under 1x exceptional · 1 to 1.5x great · 1.5 to 2x good · 2 to 3x suspect · above 3x trouble past seed.
David Sacks popularised the metric in 2020. It caught on because it compresses product, pricing, sales and retention into one number and answers a single question: what does a euro of growth cost you?
Churn attacks it twice, because the denominator is net new ARR. You spend to win a customer, then lose the ARR they carried, so the same burn produces a smaller number underneath it. This is why efficiency conversations so often turn out to be retention conversations.
Related terms
Keep this number live
Plainhub computes burn multiple from money you record in plain words, so it is current when you need it rather than the night before a board meeting.
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