Essay · About a 12 minute read

The Burn Multiple

David Sacks · Craft Ventures (Medium) Free Intermediate

This is the essay that gave the industry a clean way to answer your question: divide net burn by net new ARR, and you know how much you are spending to buy each dollar of growth. Sacks argues that spending ahead of profit is justified only when the market is pulling the product out of you, and he puts numbers on it (roughly 0.5x is excellent, 3x and up is a warning). It is a lens, not a rule you obey blindly, so read it as a starting point for judging whether your spend-down is earning its keep.

  • Burn Multiple = Net Burn / Net New ARR tells you the efficiency of your growth, not just its speed.
  • High burn can be defensible early or with a real tech moat, but it should fall fast once you are monetizing.
  • If each extra dollar of ARR is costing you many dollars of burn, that is closer to gambling than investing.
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The question it answers

  1. When should a profitable bootstrapped company deliberately spend down its cushion to grow faster, and when is that just gambling?

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