---
title: "Burn Rate"
url: "https://mahouse.world/glossary/burn-rate"
type: "glossary term"
topic: "Venture funding"
author: "Ihor Vlasov"
reviewed: "2026-09-20"
published: "2026-08-10"
---

# Burn Rate

Burn rate is the cash a company loses each month: gross burn is total spending, net burn is spending less revenue — the figure that, divided into the cash balance, gives the months of runway. It is the number a startup's board watches most, the one that decides when the next round must close, and in a fintech it is complicated by capital the licence requires the company to hold and not spend.

**Also known as:** Cash burn, Net burn, Monthly burn

## Key facts

- **Used at:** every board meeting of a loss-making company; investor updates; the sizing of a round (18–24 months of burn plus a buffer); the moment a company decides between raising, cutting and selling
- **Binding:** no — a management metric; but a bridge note's covenants or a venture debt facility may set a minimum cash or maximum burn
- **Typical levels:** seed-stage fintechs burn €100,000–400,000 a month; post-Series A €0.5–2m; the "burn multiple" (net burn ÷ net new ARR) is the efficiency test — under 1× is excellent, over 2× is a question
- **Typical distortion in fintech:** cash that is on the balance sheet but not available — safeguarded client money, regulatory own funds, scheme collateral — must be excluded before runway is computed
- **Parties:** founders, the board, existing investors deciding whether to bridge, and future investors reading the trend

## How burn rate works in practice

A company with €6m in the bank spending €500,000 a month and earning €150,000 has a net burn of €350,000 and 17 months of runway. The board's questions follow: what milestones the 17 months buy, whether the next round can be raised in month 12 on those milestones with five months of cushion, and what happens if it cannot — a bridge, cuts, or a sale. Burn is managed against milestones, not minimised: a company that burns €200,000 a month and reaches nothing is worse than one that burns €500,000 and reaches the Series A metrics.

The efficiency measure is what the burn buys. Net new ARR against net burn — the burn multiple — says how much cash each euro of growth costs: a company adding €300,000 of ARR a month on €350,000 of burn (1.2×) is building something; one adding €100,000 (3.5×) is buying growth at a price the next investor will not pay. The trend matters more than the level.

In fintech the cash balance lies. A payments company's bank accounts hold customer funds in safeguarding, own funds the licence requires, and collateral the schemes hold; none of it is runway. A company that reports €6m of cash with €2m of own funds and €1m of collateral has €3m of runway, and a board that computes it on €6m finds out in month nine.

## Example

A lending fintech has €9m in the bank: €2.5m of regulatory own funds, €1m of scheme collateral, €0.5m of safeguarded balances — €5m available. Gross burn is €800,000 a month; revenue €250,000; net burn €550,000: nine months of runway, not the sixteen the founders' deck says. The Series B needs €12m of ARR; the company has €3m and adds €250,000 a month at a burn multiple of 2.2×. The board cuts €200,000 of monthly spend, targets a B in month seven on €4.8m of ARR, and negotiates a €3m bridge from the Series A investors as a backstop. The company raises the B in month nine with six weeks of cash left — because the board computed the runway on the €5m and not the €9m.

## Common mistakes

- Counting regulatory capital, collateral or client money as runway.
- Minimising burn instead of managing it against the milestones the next round requires.
- Reporting gross burn to the board and net burn to investors, or the reverse.
- Raising a round sized to eighteen months of today's burn for a plan that doubles it.
- Ignoring the burn multiple: growth that costs three euros per euro of ARR is not growth the market will fund.

## Related terms

- [Runway](https://mahouse.world/glossary/runway.md)
- [Bridge Financing](https://mahouse.world/glossary/bridge-financing.md)
- [Series A](https://mahouse.world/glossary/series-a.md)
- [Free Cash Flow](https://mahouse.world/glossary/free-cash-flow.md)
- [Seed Investment](https://mahouse.world/glossary/seed-investment.md)
- [Regulatory Capital](https://mahouse.world/glossary/regulatory-capital.md)

— Ihor Vlasov, M&A FinTech Expert. Last reviewed 2026-09-20. https://mahouse.world/authors/ihor-vlasov