Net burn

Monthly cash out minus monthly cash in. The real rate at which your bank balance falls.

Example

$20,000 of costs against $14,000 of revenue is a net burn of $6,000/mo.

Important

If net burn is zero or negative you are default alive — you do not strictly need to raise. That single fact changes your negotiating position completely.

Related terms

• Burn rate — How much cash the company spends per month. Gross burn is everything going out; net burn is what goes out after revenue comes in.
• Runway — How many months your company can keep operating before it runs out of money, at its current rate of spending.
• Default alive — The company reaches profitability on the money it already has, assuming current growth and spending. Default dead means it does not.

Lessons that explain it

• Burn rate and runway — The number that decides whether your company survives. If you learn one thing from this whole Academy, learn this. (12 min)

All 176 terms in the Founder glossary