Net Burn

How it works

Net burn measures how much cash a startup is actually losing every month. It is total monthly cash outflow (salaries, rent, marketing, servers, everything) minus the cash coming in from revenue. If a company spends ₹1 crore a month and collects ₹40 lakh in revenue, its net burn is ₹60 lakh.

This is different from gross burn, which is just total spending and ignores revenue. Net burn is the figure investors care about most because, divided into the cash in the bank, it gives the runway — the number of months before the company runs out of money.

In India

Net burn became a defining metric for Indian startups during the funding boom and the funding winter that followed. When venture capital was cheap, many growth-stage companies ran very high net burn to chase user growth. As global rates rose and funding tightened, investors and boards pushed founders to cut burn aggressively, and "path to profitability" became the dominant narrative.

Indian listed new-age companies such as food-delivery and fintech players were repeatedly judged by markets on how quickly they reduced net burn and turned cash-flow positive. The same discipline now flows down to private rounds, where founders are expected to show a credible plan to extend runway rather than simply raise the next round.

Example

A Bengaluru SaaS startup holds ₹12 crore in the bank and has a net burn of ₹1 crore a month. Its runway is roughly 12 months. If it grows revenue and trims costs to cut net burn to ₹50 lakh, the same cash now lasts about 24 months — buying time to raise at a better valuation or reach breakeven.

Common mistakes

Founders often quote gross burn to look efficient, or measure net burn on a single good month. Burn should be tracked as a stable monthly average. Another trap is treating one-off inflows — a tax refund or a customer prepayment — as recurring revenue, which flatters net burn and makes runway look longer than it really is.