Burn rate is how fast a startup spends its cash reserves, typically measured monthly. If you have ₹1 crore and spend ₹10 lakhs/month with zero revenue, your burn rate is ₹10 lakhs/month and runway is 10 months before running out of money.
Burn rate measures monthly cash outflow. Formula: (Cash at month start - Cash at month end) = Monthly burn rate. Two types: (1) Gross burn rate—total monthly expenses (salaries, rent, marketing, servers, etc.), (2) Net burn rate—expenses minus revenue. Example: ₹50 lakh expenses, ₹20 lakh revenue = ₹30 lakh net burn. Burn rate determines runway: Cash in bank ÷ Monthly burn rate = Months until broke. If ₹2 crore in bank, ₹25 lakh monthly burn = 8 months runway. Why it matters: (1) Fundraising timing—need to raise capital before running out (takes 6+ months), (2) Growth vs sustainability tradeoff—high burn = fast growth but risky, (3) Investor confidence—VCs want efficient burn (capital-efficient growth). Healthy burn varies by stage: Pre-product: Minimal (₹2-5 lakhs/month for small team), Post-PMF: Moderate (₹20-50 lakhs/month scaling), Growth stage: High (₹1-5 crores/month aggressive expansion). Red flags: Burn increasing faster than revenue, runway under 6 months without fundraise progress, burn on non-growth activities (fancy office, perks). Managing burn: (1) Ruthless prioritization—cut non-essential costs, (2) Revenue focus—even small revenue extends runway, (3) Flexible costs—contractors over full-time, cloud over servers, (4) Regular reviews—monthly burn analysis, forecast adjustments.
WeWork: Burned $1.9 billion in 2019 while revenue was $1.8 billion. Massive burn led to failed IPO and near-collapse.
Uber: Burned $1 billion/quarter at peak to subsidize rides and dominate market. High-risk strategy that eventually worked.
Typical Indian SaaS: ₹15-30 lakh monthly burn in early stage, targeting 18-24 month runway between funding rounds.
No universal number. Early stage: ₹5-20 lakhs/month. Growth stage: ₹50 lakhs - 2 crores. Key: burn should drive 3x revenue growth or user acquisition.
Cut non-essential costs (office, perks, non-core hires), negotiate vendor contracts, pause paid marketing, switch to contractors, increase prices.
Yes, if revenue covers all expenses (ramen profitability). Rare in early startups—usually means under-investing in growth.
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