Burn Rate” measures how quickly a company uses its net cash (i.e., cash generated by the business less all Expenses paid out in cash) over a set period of time. The Burn Rate helps determine the length of time that a company can continue operating before it will need to seek additional Financing.

For example, if your Startup has a Burn Rate of $500,000 per month and $3,000,000 in available cash, then your Startup has a cash runway of six months and it will need to start raising Financing well in advance of the six-month deadline.