Burn Rate

AAA

DEFINITION of 'Burn Rate'

The rate at which a new company uses up its venture capital to finance overhead before generating positive cash flow from operations. In other words, it's a measure of negative cash flow.

INVESTOPEDIA EXPLAINS 'Burn Rate'

Burn rate is usually quoted in terms of cash spent per month. For example, a burn rate of 1 million would mean the company is spending 1 million per month. When the burn rate begins to exceed forecasts, or revenue fails to meet expectations, the usual recourse is to reduce the burn rate (which, in most companies, means reducing staff).

RELATED TERMS
  1. Venture Capital

    Money provided by investors to startup firms and small businesses ...
  2. Trading Below Cash

    When a company's total share value is less than its cash minus ...
  3. Angel Investor

    An investor who provides financial backing for small startups ...
  4. Zombies

    Companies that continue to operate even though they are insolvent ...
  5. Dry Powder

    A slang term referring to marketable securities that are highly ...
  6. Cash Flow

    1. A revenue or expense stream that changes a cash account over ...
RELATED FAQS
  1. What are examples of products and companies that rely on protective tariffs to survive?

    The best way for a startup to have sustainable growth is to use revenues for growth rather than outside funding. Startup ... Read Full Answer >>
  2. How has investing in the Internet sector evolved over time?

    Investing in the Internet sector has become more conservative over time. It reflects a more measured approach that shies ... Read Full Answer >>
  3. What risks does a business owner face under a business structure with unlimited liability?

    The risks that a business owner faces under a business structure with unlimited liability are literally unlimited, but they ... Read Full Answer >>
  4. How do I set up a Limited Liability Company (LLC)?

    The specific process and procedures for organizing a limited liability company (LLC) vary from state to state. However, the ... Read Full Answer >>
  5. If I retire in the Philippines, will I be able to work or start a small business?

    Foreign retirees entering the Philippines with plans to become permanent residents may start a business or work once they ... Read Full Answer >>
  6. Who are Berkshire Hathaway's (BRK.A) main competitors?

    Led by renowned investor Warren Buffett, Berkshire Hathaway (BRK.A) is involved with multiple sectors of industry, facing ... Read Full Answer >>
Related Articles
  1. Markets

    Burn Rate Key Factor In Company's Sustainability

    Be careful around companies with high cash burn rates. These investments can turn to ashes.
  2. Investing Basics

    Analyzing An Acquisition Announcement

    These deals can make or break investors' returns. Find out how to tell the difference.
  3. Markets

    Are Your Stocks Doomed?

    When a company is headed for trouble, the warning signs are usually there. Learn how to spot disaster.
  4. Entrepreneurship

    Run Your Finances Like A Business

    Think of yourself as your own little company. To make it run smoothly, you need to take a look at your books.
  5. Investing

    Chasing Down Biotech Zombie Stocks

    Find out whether you have "living dead" stocks lurking in your portfolio.
  6. Markets

    The Story Of Zipdial's Success

    Here is how ZipDial formed and subsequently shot to success in the Asian market.
  7. Economics

    Explaining the Cash Budget

    A cash budget is a plan for the inflows and outflows of cash for a business or an individual.
  8. Entrepreneurship

    Can I Become An Angel Investor?

    Because of SEC rules, you already need significant assets to become an angel investor.
  9. Economics

    Tech Startup Momentum Being Generated In Detroit

    Rising from the ashes in the once proud auto-manufacturing City of Detroit is a rapidly emerging tech startup scene that could prove to be its salvation.
  10. Entrepreneurship

    The 10 Richest Women In Fashion

    The top 10 richest women in fashion have many similarities as well as differences. From nationality to career trajectory, these women have established themselves in their own unique ways.

You May Also Like

Hot Definitions
  1. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  2. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  3. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  4. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  5. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  6. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
Trading Center