Most founders learn what their startup burn rate is the same way: a board member or investor asks about runway in a meeting, and they realize they don't have the answer ready. Don't be that founder.
Burn rate is not a complicated concept — it's how much money your company spends per month. But the number is only useful if you understand which version of it you're looking at, what a reasonable burn looks like at your stage, and how to make burn decisions that don't quietly kill your company six months later.
Net burn vs. gross burn
Gross burn is your total monthly cash out: salaries, rent, software, contractors, everything. Net burn is gross burn minus revenue. The number that matters for runway calculations is net burn.
If your gross burn is $80,000/month and you have $30,000 in monthly recurring revenue, your net burn is $50,000/month. At $500,000 in the bank, you have 10 months of runway. At $1M in the bank, you have 20 months.
Most early-stage founders track gross burn by default because it's easier to pull — it's right there in the bank statement. The problem is that gross burn overstates your problem if you have any revenue, and understates your problem if revenue isn't growing as fast as costs. Net burn, updated every month, is the productive number.
What startup burn rate looks like at pre-seed and seed
There's no single right burn number for a given stage, because burn depends on team size, market, and what you're trying to prove. But as a frame of reference:
At pre-seed (pre-revenue, typically $500K–$1.5M raised), a founding team of two or three should be able to run at $20,000–$50,000/month in net burn. Burning more than that before you have paying customers means you're building infrastructure for a company that hasn't proven it should exist.
At seed (typically $1.5M–$3M raised), burn of $80,000–$150,000/month is common once you've added early engineering and go-to-market capacity. The thing to watch is whether revenue growth is outpacing the increase in burn. If you're adding $30K/month in costs and $5K/month in revenue, the trend line is the problem — not the absolute number.
The burn decisions founders get wrong
The most common burn mistake at the early stage isn't spending too much. It's spending in the wrong places and at the wrong time.
The first is hiring before achieving product-market fit. Bringing on sales reps before you have a repeatable sales motion is expensive and demoralizing for everyone involved. The rep can't succeed because there's no playbook. The founders burn runway managing someone they should have hired six months later.
The second is infrastructure spending that front-runs revenue. Enterprise-grade security certifications, expensive monitoring tools, data warehouses before you have customers or compliance requirements that necessitate them — these are a way of feeling like a real company before you are one.
The third is implicit burn. A founder taking six months to find the right CTO is a burn problem. A strategic pivot that takes four months to execute is a burn problem. Time is money even when it's not appearing in the monthly burn calculation.
How to think about startup burn rate when you're pre-revenue
When you're pre-revenue, every quarter at current burn rate should map to a concrete milestone. The milestone should be binary: either you have it or you don't. Ask every quarter: what will I have proven if I burn the next three months at this rate, and what does reaching that milestone let me do next?
If the answer is unclear, or if reaching the milestone doesn't obviously get you to a fundable position, you have a strategic problem that more runway won't fix. Cutting burn slows the bleeding. It doesn't change the destination.
Runway is a management tool. It tells you how much time you have to get somewhere specific. If you don't know where you're going, having more of it doesn't help.
If you're pre-revenue and working through how to make the most of a pre-seed or seed raise, Alder partners with operator-founders at exactly that stage — building the product and go-to-market before runway becomes a crisis. Pitch us →