Gross Burn Rate
Definition
Gross burn rate is the total amount of cash a company spends per month before accounting for any revenue. It includes all operating expenses such as payroll, rent, software, and marketing, and represents the baseline cash outflow that must be covered to keep the business running.
Formula
Overview
Gross burn rate measures total monthly cash expenditures regardless of incoming revenue. Unlike net burn rate, which offsets spending with revenue, gross burn rate shows the full cost of operating the business. This distinction matters because a company generating $50K in monthly revenue with $200K in expenses has a very different risk profile than a pre-revenue company spending $200K.
Investors pay close attention to gross burn rate during due diligence because it reveals the company's fixed cost structure. A startup with a gross burn rate of $150K/month and 18 months of runway has a very different margin of safety than one burning $400K/month with the same runway. High gross burn also limits flexibility during downturns since cutting to profitability requires eliminating more spending.
For seed-stage startups, a typical gross burn rate ranges from $50K to $150K per month, while Series A companies often burn $200K to $500K per month. The key question is whether gross burn is translating into measurable progress on MRR, user growth, or product development milestones.
Example
A startup spends $80K on payroll, $10K on cloud infrastructure, $5K on office costs, and $15K on marketing. Gross burn rate = $80K + $10K + $5K + $15K = $110K/month.
Related Terms
Related Articles
Related Calculators
Track Gross Burn Rate and more with culta.ai
Start free and get real-time visibility into the metrics that matter for your startup.