# What is burn rate? > Burn rate is how quickly a startup spends its cash reserves, measured monthly. Gross burn is total monthly spending; net burn is spending minus revenue — the number that matters. Runway is cash divided by net burn: $2 million in the bank with $100,000 net burn is twenty months of runway. Source: https://anytime-capital.com/learn/venture/what-is-burn-rate · Topic: Startup finance & VC · Updated: 2026-08-28 · Publisher: Anytime Capital Two numbers govern every startup conversation that matters — how much you have, and how fast it's leaving. Everything else in startup finance is commentary on that division problem. ## Gross vs net, and which to watch Gross burn is everything out the door monthly — payroll, rent, infrastructure, contractors. Net burn subtracts collected revenue. A company spending $150K and collecting $90K has $150K gross, $60K net burn — and net is the survival metric, because it's what actually drains the account. Watch the composition too: burn concentrated in experiments you can stop is very different from burn locked into leases and salaries. The best operators know their 'reducible within 60 days' number cold. ## Runway: the only formula Runway (months) = cash ÷ net burn. The honest version uses projected net burn, not last month's: hiring plans, ramping contracts, and seasonality all bend the curve. Re-run it monthly with the board-level assumption set, and treat any answer under twelve months as a flashing light — fundraises consume a quarter or more, and you want to raise from evidence, not from need. Paul Graham's 2015 formulation remains the cleanest lens: is the company default alive (reaches profitability on current trajectory before cash runs out) or default dead? Knowing which you are changes every decision downstream. ## When to cut, and how founders get it wrong The pattern that kills companies isn't high burn — it's high burn with low information. Spending aggressively against a working, measured growth motion is what the money is for; spending aggressively while 'figuring it out' is a countdown. The classic error is cutting late: teams shave 10% when the math demanded 40%, then make the real cut anyway with three months less runway. The operational corollary: cash discipline is mostly plumbing. Consolidated accounts, visible balances, approval flows on spend, and no money leaking through forgotten subscriptions or expensive transfer rails — boring controls that quietly buy weeks. ## Burn in a multi-currency, multi-rail company Modern startups burn across borders — international contractor payouts, global vendors, sometimes stablecoin payments alongside bank rails. The runway math is unchanged, but the plumbing matters more: every payment rail with fees and float is a small tax on burn, and treasury balances scattered across platforms are runway you can't see. Consolidating visibility — dollars and digital assets in one entity-titled picture — keeps the denominator honest. ## Frequently asked questions ### What's a 'good' burn rate? There isn't one in the abstract — burn is judged against progress purchased. The cleaner modern metric is the burn multiple: net burn divided by net new ARR, where under roughly 1.5x reads efficient and above 3x reads alarming, per widely used post-2022 benchmarks. ### How much runway should we keep? Plan raises to land with 18–24 months, and treat 12 months as the action threshold — enough to change trajectory or run a fundraise from strength. ### What does 'default alive' mean? Paul Graham's 2015 test: on current growth and spending, does the company reach profitability before the cash runs out? Default-alive companies choose their financings; default-dead ones need them. ### Do investors see our burn? Yes — burn and runway headline every board deck and diligence request. Investors respect high burn with high information; unexplained burn is what draws the hard questions. ## Related - [What is venture debt?](https://anytime-capital.com/learn/venture/what-is-venture-debt) - [Seed vs Series A](https://anytime-capital.com/learn/venture/seed-vs-series-a) - [Crypto accounts for AI startups](https://anytime-capital.com/business/crypto/ai-startups) **See all your runway in one place.** Anytime Capital consolidates the crypto side of startup treasury — balances, payouts, conversions — so the runway math never has a blind spot. https://anytime-capital.com/signup --- - Company, fund, and accelerator names are referenced for identification and education only; no affiliation, sponsorship, or endorsement is implied. All trademarks belong to their owners. - Figures describing third-party firms and market norms are widely reported values as of the years cited and may have changed. Verify current details with primary sources. - Information on this page is general and educational — it is not investment, legal, or tax advice, and it is not an offer of securities. - Anytime Capital is a licensed money services business.