Gross vs Net Burn Rate: What Founders (and VCs) Actually Mean
Gross burn, net burn, and the burn multiple — what each one measures, which one VCs ask about, and how to read them without fooling yourself.
When a VC asks "what is your burn?", they almost always mean net burn — and founders almost always quote gross burn. The gap between the two is where a lot of confused board meetings come from. Here is the clean version.
Gross burn
Gross burn is everything that leaves your bank account in a month — salaries, rent, cloud, ads, tools, contractors. It tells you how expensive the company is to run, independent of revenue.
Net burn
Net burn is the number that drains your cash. If you spend ₹12L and earn ₹4L, your net burn is ₹8L — and that is what divides into your cash to give runway. When revenue exceeds expenses, net burn is zero or negative: you are cash-flow positive.
Both matter. Two startups can have identical ₹8L net burn while one spends ₹9L and the other ₹20L — very different risk profiles if revenue wobbles.
The burn multiple
Investors increasingly look at the burn multiple — how much you burn to add a rupee of new revenue:
A burn multiple under 1.5 is strong for an early-stage startup; over 3 means you are buying growth expensively. It is the single fastest read on capital efficiency.
Common mistakes
- •Quoting gross burn as "burn" and accidentally implying your runway is shorter than it is.
- •Forgetting one-off costs (an annual software prepayment) that spike a single month — look at a 3-month average.
- •Ignoring revenue volatility — for lumpy, transactional businesses, net burn swings month to month.
Get all four — gross, net, 3-month average and burn multiple — from our free burn rate calculator, or connect your data and Runway tracks them automatically.
Frequently asked
What is the difference between gross and net burn?
Gross burn is your total monthly cash outflow (all expenses). Net burn is gross burn minus monthly revenue — the rate your cash actually depletes at.