What Is Your Startup’s Cash Burn Rate?

Cash Burn Rate is one of the core financial metrics you have to keep in mind, all the time.

Okay, but what is it?

There are 2 different burn rates:

  • Gross Burn Rate: It’s the average amount of money, monthly consumed, to pay for your startup’s activities. In other words, it’s how much money you are spending per month to pay for salaries, rent, energy, marketing, development, services, and other expenses.
  • Net Burn Rate: It’s the average monthly negative cash flow. For this metric, you’ll consider not only your expenses, but any revenues that you might have too.
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What Is Your Startup’s Cash Runway?

Now that you know what is your cash burn rate, you may understand this post’s question.

Your Cash Runway is the amount of time your startup has before its cash balance turns into negative.

For example, if your startup’s cash balance is being reduced by $5,000 per month, and you have $20,000 as available cash, in 4 months your startup will be out of money.

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