David Sacks: Burn Multiple should trend from 2.0 to zero at IPO
David Sacks · What the Future of SaaS Holds with David Sacks, Founder & General Partner, Craft Ventures · Sep 13, 2023 · at 34:33
David Sacks, General Partner at Craft Ventures, discusses how startups should benchmark their Burn Multiple (Net Burn / Net New ARR) across different funding stages.
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“Your burn multiple, which is just your burn divided by your net new ARR, it should be going down. And obviously, by the time... That's the point, it should be going down, and so, like, if you're a late stage company, you're like a growth stage company, like, your burn multiple should probably be one or even less, meaning, let's say you add twenty million of ARR, net new ARR in a year, you shouldn't probably be burning more than twenty million dollars. Like, you know, and then by the time you get to be public, obviously, you, ideally you'd be profitable or cash flow positive, in which case your burn is zero, And hopefully your net new AR is a big number, so, zero over, you know, a big number, it's zero. So, your burn multiple should be trending down towards zero over time. It can start at the seed round at a high place by series A, you know, it's okay to probably be at two-ish, you know, growth round one-ish, public company zero.”
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