Why burn multiple beats LTV/CAC for investors
LTV/CAC is forward-looking and easy to game (long payback assumptions, optimistic churn). Burn multiple is backward-looking and unforgiving — it's just $ burned divided by $ ARR added. Investors love its simplicity; founders should track it monthly.
The 'good' benchmark moved
In 2021's ZIRP era, burn multiples of 3–4 raised capital easily. Post-2022, investors demand <2 for Series A-B and <1 for later stages. Founders not tracking it now find out the hard way at the next raise.
Cutting burn vs. growing ARR
Two paths improve the ratio. Cutting burn is faster (RIFs, vendor consolidation) but caps growth. Growing ARR (better conversion, expansion) is slower but increases enterprise value more. Most boards in 2026 want both.
Related guides
Long-form playbooks on the same topic, written by the RevenueLab editorial team.
State of Side Income 2026: Real Net Hourly Pay, Breakeven, and Tax Across 15 Side Hustles
Our annual report on side income in 2026 — gross vs net hourly pay for 15 paths, startup cost and breakeven timing, six-month income and quit rates, and what side income really costs in tax. Free to cite.
Read the guideHow to Calculate ARR (2026): Real SaaS Math, NRR, GRR, and the Rule of 40
The exact formula investors use for ARR, why NRR matters more than new sales, and how to score yourself against the Rule of 40 — with worked examples.
Read the guideFAQ
Should I use GAAP or cash burn?
Cash burn (operating cash flow) is the investor standard. GAAP can mask burn through accruals. Use the bank balance change adjusted for financing.
What counts as 'net new ARR'?
New ARR + Expansion ARR − Churned ARR − Contraction ARR. The single number that captures the quarter's net commercial result.
Does this apply to non-SaaS?
Adapt to recurring transactions for marketplaces and consumer subs. For one-time-sale businesses, use net new revenue (TTM) instead of ARR.
Bonuses are withheld differently from regular pay — supplemental withholding on bonuses uses the 22% supplemental rate.
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