Burn Multiple Calculator
Calculate burn multiple = net cash burn ÷ net new ARR. Below 1.0 = elite. The David Sacks metric replacing Rule of 40 as preferred VC screen.
| Cash Burn | — |
| Net New ARR | — |
| Burn Multiple | — |
| David Sacks Tiers | — |
| Implied Capital Efficiency | — |
Burn Multiple, coined by David Sacks (Craft Ventures), measures how efficiently a startup converts cash burn into new ARR. Formula: Net Cash Burn ÷ Net New ARR. Lower = better. Replaces Rule of 40 in many VC discussions because it captures BOTH growth and capital efficiency in one number without separately tracking margin.
The Sacks Tiers
Sacks publishes the canonical tiers: under 1.0 = AMAZING (top decile). 1.0-1.5 = GREAT. 1.5-2.0 = GOOD. 2.0-3.0 = SUSPECT. Over 3.0 = BAD. A burn multiple of 3.0 means burning $3 to add $1 of ARR — unsustainable except at very-early stages. Mature SaaS at scale typically run 0.5-1.5.
How to Calculate Net New ARR
Net New ARR = (End-of-Period ARR) - (Start-of-Period ARR). Includes new logos + expansion - churn - contraction. Use net new (not gross new) because expansion and churn are real economic outcomes. For seasonal businesses, use trailing 12-month ARR change for a smoothed picture.
Why It Beats Rule of 40
Rule of 40 can mask problems: a company with 50% growth + -30% margin scores 20 (poor), but if growth came efficiently (0.5 burn multiple), it is actually well-positioned. Burn multiple is single-number and captures both vectors directly. For ZIRP-era growth companies pivoting to efficiency, burn multiple is the cleaner KPI.
Last updated May 2026. Sources: David Sacks — Burn Multiple, OpenView Benchmarks.