VC & PE Glossary
What Is Gross Burn?
Updated
Definition
Gross burn is the total cash a company spends per month before offsetting any revenue—measuring raw spending pace independent of income.
Useful for: Founders, Investors
Gross burn is monthly cash outflows before revenue— the gross spending rate that shows how expensive the operation is to run.
How it works
Calculate gross burn by summing operating cash payments in a month: salaries, contractors, cloud, marketing, rent, and other opex. Ignore customer collections for this metric. Net burn subtracts cash revenue collected in the same period—often the number founders cite for runway because it reflects net cash loss. A company with $500k gross burn and $200k monthly revenue has $300k net burn. Gross burn highlights cost structure; net burn highlights survival timeline. Both matter when modeling the next round size and hiring plan.
Why it matters
- Founders: Separate gross from net when cutting costs—revenue growth can mask bloated gross burn until growth stalls.
- Investors: Compare gross burn to headcount and GTM strategy; high gross burn with weak revenue may require larger rounds or sharper efficiency plans.
Common mistake
Reporting net burn while investors model on gross burn for downside scenarios where revenue dips—always show both in board materials.
Related ideas
Net burn, runway, free cash flow, and default alive versus default dead framing.
Related terms
- Free Cash Flow — Free cash flow is the cash a business generates after paying operating expenses and capital expenditures—the money left to repay debt, distribute to owners, or reinvest without raising new capital.
Common questions
Short answers for founders, LPs, and operators