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Efficiency guide
Two numbers decide whether your growth reads as efficient or as expensive: the burn multiple (how much you spend to add a dollar of recurring revenue) and your runway (how long the cash lasts). A partner computes both in the first ten minutes of looking at your model — often before they finish your traction slide. This guide gives you the exact formulas they use, the tiers they grade against, one worked example, and a calculator that runs the same math as the RaiseReady report engine.
Coined by David Sacks, the burn multiple answers one question: how many dollars of net cash did you burn to generate one dollar of net-new ARR? Lower is better. It's the number that separated the "growth at any cost" era from the efficiency era, and it's now the first efficiency metric most Series A partners open.
The report engine computes it from monthly burn as burn multiple = (monthly net burn × 12) ÷ net-new ARR over the trailing year — the same thing, annualized. Note it uses net burn and net-new ARR: churn counts against you on both sides, which is exactly why a company losing logos can post a fine-looking growth number and still a bad burn multiple.
| Burn multiple | Reads as | What a partner thinks |
|---|---|---|
| < 1.0× | Amazing | Every dollar in generates more than a dollar of new ARR — you could raise on efficiency alone. |
| 1.0 – 1.5× | Great | Clearly fundable; the efficiency story helps rather than needs defending. |
| 1.5 – 2.0× | Good | Normal for a company still finding its motion; fine if growth is strong. |
| 2.0 – 3.0× | Suspect | You'll be asked to explain it — one-time costs? a bad quarter? — before the number is trusted. |
| > 3.0× | Bad | Reads as an unproven engine. Fast growth here reads worse, not better: you're buying revenue. |
Tiers from the report engine's benchmark set (Sacks/Craft framing). The stage bar tightens over time: seed clears at ≤3× (strong ≤2×), Series A clears ≤2× (strong ≤1×), Series B clears ≤1.5× (strong ≤1×). CRV's 2026 Series A bar has effectively tightened toward ≤1.0×.
Runway is months of cash left at your current burn. It matters less as a survival number and more as a leverage number: investors can tell when you're raising from strength versus raising because the account is about to hit zero, and they price that difference into the term sheet.
The engine assumes post-close burn steps up to whichever is larger: +50% on today's burn (you hired against the plan) or the amount that would spend the round over 30 months. Then it reads your position off the result:
| Runway today | How it reads |
|---|---|
| < 9 months | Raising under duress — investors know a round takes ~12 weeks, so under 9 months means you'll be desperate before you close. Move fast, or bridge first. |
| 9 – 15 months | Inside the normal raise window. Start now; a round takes about 12 weeks end to end. |
| > 15 months | Raising from strength — you can walk from a bad term sheet, and investors can feel it. |
The 2025–26 norm investors want a round to fund is 24–36 months of post-raise runway. If your raise size doesn't buy that at a believable burn, the round size itself becomes a diligence question.
Take a seed company: $800K starting ARR, $1.4M ending ARR a year later, $220K/month net burn, $1.1M cash, raising a $3M seed.
None of this needs a spreadsheet — it's five divisions. But seeing it the way the partner will, before the meeting, is the difference between walking in with a plan and getting surprised by the question.
Same formulas as the report engine. Nothing leaves your browser — this is client-side math.
Burn multiple = (monthly burn × 12) ÷ (current ARR − starting ARR). Runway = cash ÷ monthly burn. Post-raise burn = max(burn × 1.5, (cash + raise) ÷ 30). These mirror the RaiseReady report engine exactly.
Burn multiple and runway are two of a dozen numbers an IC memo cites. The RaiseReady report computes all of them from your inputs, scores each 🟢/🟡/🔴 against the stage bar, and writes the IC-memo language around them — plus the financial model, market sizing, comps and data-room blueprint. Start with the free on-page check.
The free on-page check grades you against the 25-item rubric in two minutes. The $990 report computes burn multiple, runway, Rule of 40, CAC payback and the rest from your numbers and writes the memo around them.
Run the free readiness check →No — they're related efficiency metrics but measure different things. Burn multiple covers your whole net burn against net-new ARR (product, G&A, everything, minus churn). CAC payback isolates sales & marketing efficiency (months to recover acquisition cost from gross margin). The magic number is net-new ARR ÷ prior-quarter S&M. Investors read all three; burn multiple is the company-wide one.
Burn multiple is undefined (you'd be dividing by zero or a tiny number, which produces a meaningless spike). Pre-revenue and pre-seed companies are judged on runway, milestones and the team instead — the burn multiple starts mattering once you have a full trailing year of recurring revenue to divide into.
Net burn — cash out minus cash in — for both the burn multiple and runway. Gross burn overstates how fast you're actually depleting cash if you have revenue coming in. Investors expect the net figure; be ready to show the bridge from gross to net so they trust it.
Show it explicitly. Compute the metric both with and without the one-time item, name the item, and let the partner see the normalized number. Trying to bury it is the fast path to the "suspect" read — surfacing it yourself is how you keep the "great" read.
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