GLOSSARY
Burn rate
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Burn rate is the rate at which a startup or maker is spending its capital to cover expenses like salaries, marketing, and operations.
What is Burn Rate?
Burn rate refers to how quickly a startup is using up its capital to cover expenses.
Why It Matters
Monitoring burn rate helps founders understand how long their funds will last and when they may need to raise more money.
Examples of Burn Rate
For example, if a startup has a monthly burn rate of $50,000, it means they are spending $50,000 per month to operate.
Related Concepts
- Runway: The length of time a startup can before running out of capital, calculated by dividing current cash reserves by the burn rate.
- Cash Flow: The movement of money in and out of a business, impacting the burn rate and overall financial health.