Burn Multiple Calculator
Calculate your Burn Multiple — the capital efficiency ratio coined by David Sacks at Craft Ventures. Net burn divided by net new ARR. Tells investors how many dollars you burn for every dollar of new recurring revenue you generate. The lower, the better.
What Is the Burn Multiple?
The Burn Multiple is a single-number SaaS efficiency metric introduced by David Sacks (Craft Ventures, PayPal mafia) in 2020. It measures how much capital a startup burns to generate one dollar of new annualized recurring revenue. A Burn Multiple of 1.0 means you spent $1 of net burn to add $1 of net new ARR. The lower the multiple, the more capital-efficient the company.
Burn Multiple Formula
Burn Multiple = Net Burn / Net New ARR
Healthy: Burn Multiple ≤ 2.0
The David Sacks Bands
Sacks published explicit bands. Below 1.0 is "amazing" — generating more new ARR than you burn. Between 1.0 and 1.5 is "great" — well above benchmark efficiency. Between 1.5 and 2.0 is "good" — passes investor screens. Between 2.0 and 3.0 is "suspect" — investors will probe pricing, churn, and ICP. Above 3.0 is "bad" — fundamental capital efficiency problem and a likely down round at the next raise.
How It Differs From Magic Number
Magic Number measures sales efficiency only — return on S&M spend. Burn Multiple measures total capital efficiency including R&D, G&A, and every other expense line. Magic Number can look great while Burn Multiple is awful (your engineering team is too expensive). Most growth-stage SaaS reports both — Magic Number for go-to-market health, Burn Multiple for whole-company capital efficiency.
Why It Got Popular
The Burn Multiple replaced "growth at all costs" thinking after the 2022 SaaS reset. Public market investors now prioritize companies with Burn Multiples below 2 over companies with higher growth but worse efficiency. For founders, the metric travels well — board members, VCs, and acquirers all understand it instantly. It also exposes companies hiding behind vanity ARR growth that comes from unsustainable customer acquisition spend.
How to Improve Your Burn Multiple
Two levers: cut net burn or grow net new ARR. Cutting burn is faster — review headcount efficiency, vendor consolidation, and discretionary spend. Growing net new ARR is harder but more durable — improve net revenue retention through expansion, raise prices on new logos, and tighten ICP to lift conversion. Reducing churn often does both at once: it shrinks the gross-to-net-new-ARR gap while not changing burn.
Sources: David Sacks (Craft Ventures, 2020), Sammy Abdullah (Blossom Street Ventures), OpenView SaaS Benchmarks 2024. Last updated: April 2026.