Gross burn vs net burn
Each, defined
Gross burn
Gross burn is a cash and runway metric, calculated as Total operating cash outflows in the month. Ignores revenue.
Formula: Total operating cash outflows in the month
Net burn
Net burn is a cash and runway metric, calculated as Operating and investing cash out − cash in, excluding financing inflows. The one that matters for runway. Equity raised or debt drawn is not negative burn.
Formula: Operating and investing cash out − cash in, excluding financing inflows
Side by side
| Gross burn | Net burn | |
|---|---|---|
| Measures | All cash out | Cash out − cash in |
| Tells you | The cost base | How fast cash is falling |
| Used for runway | No | Yes |
One month's burn, both ways
A startup spends $160,000 in a month and collects $60,000 from customers. Gross burn is $160,000; net burn is $100,000.
| Line | Amount |
|---|---|
| Cash out | 160,000.00 |
| Gross burn | 160,000.00 |
| Cash in from customers | 60,000.00 |
| Net burn | 100,000.00 |
How they relate
Gross burn shows the cost base: what the company would spend if revenue stopped. Net burn shows the rate the bank balance is actually falling, and it is the figure runway is computed from.
Both are cash measures taken from the bank, not the P&L. Money raised is left out of both — financing extends runway but does not reduce burn.
Questions
- Which burn is runway based on?
- Cash divided by net burn, in months.
- Does fundraising reduce net burn?
- No. Burn excludes financing inflows: a new round adds to cash, not to collections.
See it computed
Worked through: the calculators, the journal entries and the tools that use these terms.
Definitions are the glossary’s, generated from the same documents. Figures in the examples are computed by tested functions, not typed. General information for US companies under US GAAP, not accounting or tax advice.