Gross vs Net Burn, and Why the Difference Decides When You Raise

Short answer

Gross burn is total monthly cash out — payroll, rent, software, everything you spend. Net burn is gross burn minus cash revenue: what your bank balance actually loses each month. Runway is always calculated on net burn, but investors read gross burn to judge your cost discipline and downside risk.

Two startups each have $1M in the bank and lose $40K a month. Identical runway — 25 months. Except one spends $50K and collects $10K, while the other spends $200K and collects $160K. The first survives a bad quarter; the second is four churned customers from a crisis. That's the whole gross burn vs net burn distinction, and why sophisticated investors always ask for both numbers.

What is the difference between gross burn and net burn?

Carta's definitions, in founder terms:

• Gross burn = everything that leaves the account in a month: payroll, rent, software, marketing, contractors, taxes. Revenue doesn't enter the calculation.
• Net burn = gross burn minus cash coming in. It's the actual monthly decline in your bank balance — spend $100K, collect $30K, and your net burn is $70K.

Pre-revenue, the two numbers are identical and the distinction is academic. The moment revenue appears, they diverge — and so do the mistakes.

Which burn rate should you use for runway?

Net burn. Runway = cash ÷ net monthly burn, full stop. Revenue that reliably arrives genuinely extends your life.

But the mistakes founders make run in both directions:

• Using gross burn for runway makes you too conservative — you'll raise earlier and more dilutively than needed, panicking over a countdown that isn't real.
• Using net burn for everything makes you too comfortable. Net burn silently improves when revenue grows and when a big invoice happens to land — it can look great in exactly the month your cost base got worse.

For orientation: 2025 benchmark data aggregating Carta and OpenView figures puts median net burn around $25K/month at pre-seed and roughly $80K/month for seed-stage SaaS, while FP&A benchmarks published by Runway put the median Series A company near $180K/month of net burn. If you're far above the band for your stage, you need a story; far below, investors may ask whether you're investing enough to hit the next milestone.

Why the gap between the two decides when you raise

Here's the lens most burn explainers miss: the spread between gross and net burn is your fragility measure — because revenue can quit, and costs can't. Customers churn with an email. Payroll, leases and annual software contracts unwind over months and severance. So the honest question isn't "what's my runway?" but "what's my runway if revenue disappoints?"

Run the stress case with real numbers. Cash $900K, gross burn $150K, revenue $90K, net burn $60K:

• Reported runway: $900K ÷ $60K = 15 months. Comfortable.
• Revenue −30% (two churned accounts): net burn $105K → runway 8.6 months. Suddenly you're fundraising.
• Revenue −60%: net burn $114K+... effectively the gross-burn world → under 7 months.

The decision rule: time your raise off the stressed number, not the reported one. If a plausible revenue setback puts you under 9–12 months — the window a raise realistically consumes — start preparing now, while you're negotiating from strength. This is also the honest input for how much you should raise: rounds sized off flattering net burn are the ones that end in bridge rounds.

Investors run exactly this math on your numbers, which is why the financial model investors trust shows burn under a downside scenario rather than hiding it.

Keep both numbers honest

Three hygiene rules. Compute burn from bank movements, not the P&L — booked revenue isn't collected cash. Average over three months to smooth annual prepayments and tax hits. And exclude financing inflows entirely: a SAFE closing in March doesn't mean your burn improved. When cash is tight enough that intra-month timing matters, move to a weekly 13-week cash flow forecast — monthly burn math can't see a payroll date.

What this means for you

Put three numbers on one line of your monthly dashboard: gross burn, net burn, and the ratio of revenue to gross burn (coverage). Runway comes from net burn. Raise timing comes from the stress case. And cost decisions come from gross burn — because that's the only number of the three that you fully control.