---
title: "What Is Net Burn?"
term: "Net Burn"
description: "Net burn is the amount of cash a company loses each month after subtracting revenue and other inflows from operating outflows — the figure that directly determines runway."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/net-burn
---

# What Is Net Burn?

> Net burn is the amount of cash a company loses each month after subtracting revenue and other inflows from operating outflows — the figure that directly determines runway.

**Net burn** is monthly cash consumption after revenue and operating inflows — the burn rate number that actually drives how long your cash lasts.

### How it works

Track cash movement, not just P&L. Example: $450K monthly operating expenses, $120K customer collections, $30K other income — net burn ≈ $300K. With $1.8M in the bank, runway is roughly six months if nothing changes.

Net burn differs from **gross burn**, which ignores revenue and shows total operating spend. Early-stage companies with minimal revenue often report both; growth-stage boards focus on net burn as sales offset costs.

Seasonality matters: annual prepayments can make one month look cash-positive while normalized net burn stays negative. Use trailing three- or six-month averages for planning and investor updates.

Capital expenditures, debt principal, and financing inflows are usually excluded from operating net burn but should be modeled separately in a full cash forecast. Boards often ask for both operating net burn and all-in cash change in the same update.

### Why it matters

- **Founders:** Start investor conversations before net burn compresses runway below your realistic close timeline — often five to seven months of buffer.
- **Investors:** Net burn relative to ARR growth feeds metrics like burn multiple. Efficient growth shows declining net burn as a percent of new ARR; inefficient growth shows the opposite.

### Common mistake

Using accrual revenue or bookings instead of cash collected. A signed annual contract does not reduce net burn until payment hits the bank on your billing terms.

### Related ideas

See also [burn rate](/glossary/burn-rate), gross burn, runway, and [cash balance](/glossary/cash-balance).

## FAQ

### What is Net Burn in simple terms?

Net burn is monthly cash going out the door minus cash coming in from customers and other operating sources. If you spend $400K and collect $100K in a month, net burn is about $300K.

### Why does Net Burn matter?

Runway equals cash divided by net burn. For founders, it is the number that triggers fundraising timelines. For investors, rising net burn without matching growth often signals a bridge round or a plan reset.


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Source: https://venturecapitaltracker.com/glossary/net-burn