Gross burn
grohs burn
Total monthly cash expenditure before any revenue. Every dollar that leaves the company's bank account.
Gross burn is the total amount of cash your company spends each month. All of it. Salaries, benefits, rent, cloud hosting, marketing, legal, travel, everything. It does not factor in revenue. Gross burn is pure outflow.
Gross burn matters because it shows the total cost of keeping the lights on. A company with $500k/month gross burn needs $500k just to exist, regardless of revenue. If revenue disappears tomorrow, gross burn tells you how fast cash drains. Dividing your cash balance by gross burn gives you worst-case runway.
Investors ask about gross burn to understand the company's cost structure. A company with $500k gross burn and $300k net burn generates $200k in revenue. But the $500k baseline tells you the fixed cost of the operation. Cutting to profitability would require either growing revenue by $300k/month or cutting costs by $300k/month. Gross burn is almost entirely OpEx for SaaS companies, since capital expenditures are minimal.
Examples
A startup breaks down gross burn.
Salaries and benefits: $350k. Cloud infrastructure (AWS): $40k. Office and facilities: $25k. Marketing and events: $30k. Legal and accounting: $10k. Software subscriptions: $15k. Travel: $10k. Miscellaneous: $20k. Total gross burn: $500k/month.
Gross burn increases after a funding round.
Pre-Series A gross burn: $100k/month (5 people, minimal infrastructure). Post-Series A gross burn: $400k/month (25 people, sales team, marketing budget, new office). Gross burn quadrupled in six months. The board expects revenue to start growing proportionally within two quarters.
Using gross burn to model scenarios.
A company models a worst-case scenario where revenue drops to zero (major product failure or market shift). Gross burn is $600k/month. Cash in bank: $7.2M. Survival time at zero revenue: 12 months. This scenario test helps the CFO size the cash reserve needed for safety.
In practice
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Frequently asked questions
What is the difference between gross burn and net burn?
Gross burn is total monthly spending. Net burn is gross burn minus revenue. A company spending $500k/month with $200k/month in revenue has $500k gross burn and $300k net burn. Both numbers are useful: gross burn shows the total cost structure, net burn shows how fast cash is actually depleting.
Is gross burn or net burn more important?
Net burn is more important for runway calculations because it reflects actual cash depletion. But gross burn matters for understanding your cost structure and modeling scenarios. If revenue suddenly drops (as it did for many companies in 2020 and 2022), gross burn becomes your immediate reality.
Related terms
Monthly cash spending minus monthly revenue. The actual rate at which your bank account is shrinking. The number that determines runway.
How fast a startup spends cash each month. Gross burn is total spending. Net burn subtracts revenue. The clock on your runway.
How many months a startup can operate before running out of cash. Cash in the bank divided by monthly net burn.
The actual movement of cash in and out of your business. Different from revenue because it includes timing of payments, not just accrual accounting.
The day-to-day costs of running your business. Salaries, rent, marketing, cloud hosting. Everything that is not a capital expenditure.
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