Why burn multiple beats payback period
CAC payback is single-customer arithmetic. Burn multiple is the whole business. It captures the reality that some companies "earn" their growth (low burn per dollar of net new ARR) and some buy it (high burn). The investor question is always: for every dollar of burn this month, how many dollars of recurring revenue did you create?
The Bessemer scale
- Under 1.0×: best-in-class. You're funding growth from inside the engine.
- 1.0× – 1.5×: healthy. The norm for growth-stage SaaS.
- 1.5× – 2.0×: watch. Below the bar but defensible if growth rate is high.
- 2.0× – 3.0×: a problem. Capital efficiency requires intervention.
- Above 3.0×: severe. You're burning $3+ to create $1 of ARR.
What the inputs need to include
Net burn = operating cash out − operating cash in. Use cash, not GAAP loss. Strip non-recurring items (acquisition costs, one-time restructuring) for clarity.
Net new ARR = new logo ARR + expansion − contraction − churn. The "net" matters. A company that books $200k of new logos while churning $80k has $120k of net new, not $200k. Many founder-reported numbers omit the netting.
How to improve it
Two levers. Lower the numerator (cut burn — usually variable spend in sales and marketing, then headcount) or raise the denominator (improve net new ARR — usually expansion motion or churn reduction, since new-logo acquisition is the slowest lever to move). Most companies need both at once when burn multiple drifts above 2.0×.