Burn rate is how much cash your startup spends per month, typically measured as net burn (expenses minus revenue). If you have ₹1 crore in bank and burn ₹10 lakhs/month, you have 10 months runway.
Burn rate is your financial clock ticking down to zero. Two types: (1) Gross burn—total monthly expenses (salaries, rent, servers, marketing). (2) Net burn—gross burn minus revenue. If gross burn is ₹20L/month and revenue is ₹5L/month, net burn is ₹15L/month. Net burn determines runway: Cash in bank ÷ Net burn = Months until money runs out. Example: ₹1 crore in bank, ₹10L net burn → 10 months runway. Rule: Always have 18+ months runway. Below 6 months is emergency mode (cut expenses or raise immediately). Below 3 months is death spiral (can't raise funding, team panics, death). Burn rate varies by stage: Pre-revenue: All gross burn. Early revenue: High burn for growth. PMF: Optimize burn, improve unit economics. Scale: Controlled burn with clear ROI. High burn isn't bad IF you're buying real growth. But burning for "hope" (building features users don't want) kills startups. Track: How much runway does each ₹1 lakh of spend buy? Hiring costs in runway, not just salary (₹10L salary = 10 months runway gone).
Net Burn Rate = Monthly Expenses - Monthly Revenue | Runway = Cash in Bank ÷ Net Burn Rate₹50L in bank, spending ₹5L/month (2 salaries + tools + office) → 10 months runway. Must generate revenue or raise in 6-7 months.
₹10 crore raised, burning ₹50L/month (team of 20), making ₹20L revenue → ₹30L net burn → 33 months runway. Comfortable for scaling.
Burned ₹8 crore in 18 months trying to find PMF. Ran out of money, couldn't raise (no traction). Shut down.
Burn rate determines when you die (if you don't achieve sustainability or raise funding). Running out of cash is #2 startup failure reason (after "no market need"). Monitoring burn rate lets you course-correct before it's too late. Investors want 18+ months runway.
Depends on stage and runway. Pre-PMF: Keep burn low (₹2-5L/month). Post-PMF: Higher burn okay if buying growth profitably. Always maintain 18+ months runway.
When runway drops below 12 months OR when burn isn't producing results (spending ₹10L/month but metrics flat). Cut early, not in panic mode.
No. High burn is fine if: (1) You have PMF, (2) Burn produces measurable ROI, (3) You have 18+ months runway, (4) You know how to scale. Bad burn is blind spending.
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