The Change in Burn Multiple for Startups in 2023
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1 minute read / Apr 3, 2023 / data analysis /financials /startups /
The Change in Burn Multiple for Startups in 2023
Burn multiple measures the capital efficiency of a startup. Burn multiple calculated like this : net burn divided by net new ARR. Startup burn multiples have changed markedly in 2023.
Companies with more efficient burn multiples between 1-2 plan to increase their net burn per new dollar of bookings by between 14-40%. In contrast, startups with higher operating expenses will reduce their burn multiple by 34-70%. The average startup with a burn multiple of 5 plans to reduce to 1.5.
Companies with burn multiples of 3 will stand firm, operating their businesses at the same levels of efficiency.
The majority of the surveyed population plans to operate with burn multiple of 1.5 or less.
With the Series B & Series C capital markets barely open, the quantum of growth capital has plummeted nearly 80%.
Startups’ plans have shifted aggressively to capital efficiency, without a noticeable impact on ARR growth. We’re all learning to achieve the same with less.
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