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SaaS Burn Multiple Calculator

Calculate SaaS Burn Multiple (Net Burn / Net New ARR) and capital efficiency using David Sacks framework.

Disclaimer: All calculations and figures are provided for informational purposes only and without warranty. This does not constitute legal, tax, or financial advice. Liability for any decisions made based on this calculator is disclaimed.
Scenarios:

2. Net Cash Burn, Net New ARR & Cash Balance

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💡 David Sacks Burn Multiple: Net Burn / Net New ARR. Misst, wie viele Euro/Dollar verbrannt werden, um 1 €/$ neuen wiederkehrenden Jahresumsatz (ARR) zu generieren. Ein Wert unter 1,5x gilt bei VCs als hervorragend.

SaaS Burn Multiple
1.2x

The business consumes $1.20 in cash to generate $1.00 of net new ARR.

Efficiency Benchmark:🟢 Good (1.0–1.5x)
Implied Runway:24 months
Target Benchmark:≤ 1.5x (Craft Ventures)
Annualized Net Burn -$1,200,000.00cash burn / yr
Annual Net New ARR +$1,000,000.00ARR added / yr
Cost per $1 ARR$1.20cash cost basis
Cash Reserves$2,400,000.00bank capital

Startup Economics: Mastering the SaaS Burn Multiple (Craft Ventures Framework)

The SaaS Burn Multiple is the definitive metric for venture capital investors and software executives to assess growth efficiency and runway sustainability. It answers the fundamental question: how much cash must be consumed to generate $1.00 of Net New ARR.

1. Core Capital Efficiency Equations

  • SaaS Burn Multiple: Net Cash Burn / Net New ARR
  • Cost per $1.00 New ARR: Burn Multiple × $1.00
  • Net New ARR: New Bookings + Expansion ARR − Churned ARR
  • Implied Runway (Months): Current Cash Balance / Monthly Net Burn

2. Actionable Guidelines for Founders & CFOs

Compress your Burn Multiple by prioritizing net retention over high-cost outbound acquisition, reallocating marketing spend exclusively to sub-12-month payback channels, and securing multi-year cash collections upfront.

Frequently Asked Questions (FAQ)

What is the SaaS Burn Multiple and who created it?▼

The Burn Multiple was popularized by David Sacks (founding COO of PayPal and General Partner at Craft Ventures). It evaluates startup capital efficiency by dividing net cash burned by net new Annual Recurring Revenue (ARR) generated: Burn Multiple = Net Burn / Net New ARR.

What are the standard Craft Ventures Burn Multiple benchmarks?▼

Under 1.0x is 'Amazing' (top-decile capital efficiency). 1.0x to 1.5x is 'Good' (healthy venture-backed baseline). 1.5x to 2.0x is 'Suspect' (mediocre efficiency requiring operational review). Over 2.0x is 'Bad' (unsustainable capital burn).

How does Burn Multiple differ from CAC Payback Period?▼

CAC Payback strictly measures Sales & Marketing spend against new customer revenue. Burn Multiple encompasses the entire company—including R&D, executive payroll, G&A overhead, hosting infrastructure, and customer churn—providing an all-inclusive picture of burn efficiency.

What comprises Net New ARR in the denominator?▼

Net New ARR = New Bookings ARR + Expansion ARR (Upsells) − Churn ARR (Cancellations) − Contraction ARR (Downgrades). It isolates the true net growth of recurring software contracts in the reporting period.

Why does the Burn Multiple often deteriorate as startups scale?▼

Early-stage startups have minimal churn. As an ARR base matures (e.g., $10M ARR), a 10% gross churn requires $1M in new bookings just to stay flat before generating positive Net New ARR, making retention essential.

How can SaaS founders improve their Burn Multiple?▼

Top strategies include improving gross and net revenue retention (NRR > 110%), eliminating paid acquisition channels with > 18-month payback, and requiring annual upfront billing terms to accelerate cash collections.

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