Startup Jargon – Burn Rate

Introduction

Generally, investors will ask you what is your Burn Rate when looking for investment. But what is Burn Rate?

Burn Rate

Burn rate is the rate at which a company is losing money. It is typically express in monthly terms. E.g. “the company’s burn rate is currently RMB 100K per month”. In this sense, the word “burn” is a synonym term for negative cash-flow.

It is also measure for how fast a company will use up its shareholder capital. If the shareholder capital is exhausted, the company will either have to start making profit, find additional funding or close down.

 

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