What is burn rate?
Burn rate is the speed at which a startup is using its cash reserves to fund operations before generating positive cash flow. It is one of the most-watched numbers inside any early-stage company because it directly determines how long the business can survive without raising more money. Investors, board members and operators all return to burn rate again and again because everything else — hiring plans, product timelines, fundraising strategy — flows from it.
Burn is usually expressed as a monthly figure in the company's home currency. There are two flavours every founder should understand. Gross burn is the total amount of cash you spend in a month — salaries, rent, software, marketing, taxes and so on. It tells you the size of your operating engine. Net burn subtracts whatever revenue you collected in that month, so it reflects the cash you actually lose. A startup with ₹8 lakh of monthly expenses and ₹2 lakh of revenue has a gross burn of ₹8 lakh and a net burn of ₹6 lakh. Net burn is the number that drives runway, because revenue keeps the lights on a little longer.
Burn rate matters because cash is the oxygen of a startup. Even a great product with happy customers will fail if it runs out of money before reaching the next milestone. Tracking burn weekly forces founders to be honest about whether they are spending in line with the value being created. It also helps you avoid two classic mistakes: spending so slowly that growth stalls, or spending so quickly that you walk into fundraising under pressure.
How is burn rate calculated?
The math is intentionally simple. Pick a recent month — usually the latest closed month — and look at your bank statements. Add up every rupee that left the company: payroll, contractor invoices, SaaS subscriptions, rent, taxes, ad spend, hosting and so on. That total is your gross burn. Then subtract the cash that came in from customers (not including investor money or refunds). What's left is your net burn. For more stable signals, many founders use a trailing 3-month average so that one large invoice doesn't distort the picture.
Healthy ranges by stage
There is no universal "good" burn number, but there are sensible ranges. Pre- seed teams should typically keep monthly burn under ₹3–6 lakh — small team, sharp focus, no premature scaling. Seed-funded startups often run between ₹8 lakh and ₹25 lakh per month, depending on whether they are product-led or sales-led. A Series A company with strong revenue might burn ₹40 lakh to ₹1.5 crore monthly, but always against measurable growth. The key is matching burn to the milestones your next round requires, not what your peers are spending.
Tips for founders
- Track gross and net burn every month — never just one.
- Use a 3-month rolling average to smooth out lumpy expenses.
- Tie every line of burn to a milestone or hypothesis you're testing.
- Build a 12-month forecast and stress-test it with a 20% revenue miss to see how runway changes.
- Cut burn before you have to, not after — investors notice fire drills.
- Re-forecast after every major hire or cut; don't let your model drift from reality.