SaaS Company Benchmarks - Burn Multiple

The Capchase Team
The Capchase Team
Posted on
August 31, 2022
min read
SaaS Company Benchmarks - Burn Multiple

Growth benchmarks are important indicators of your company’s success and are useful for setting goals. One metric that is useful for gauging your company’s success is Burn Multiple. Below, we define how Burn Multiple is calculated, why it is an important metric for investors, and share the rates you need to be at to be considered in the top quartile of same-stage SaaS companies.

Burn Multiple Defined

Before analyzing how your company’s Burn Multiple compares to that of other similar-stage SaaS companies, it is important to understand how Burn Multiple is calculated:

Burn Multiple tells you how much your business is spending to generate each new dollar of ARR, and evaluates burn as a multiple of revenue growth. This is important for any business, but especially so for venture-backed companies that are concerned with cash runway.

The higher the Burn Multiple, the more a company is spending to achieve each incremental dollar of ARR. The lower the Burn Multiple, the more efficiently your business is growing. A burn multiple <2 is good, anything >4 is concerning.

Comparing Burn Multiple by Company Stage

When comparing your company’s burn multiple to that of peer companies, it is important to understand that early-stage companies that have only just started selling their products typically have higher costs and higher burn multiples than more mature businesses.

A comparison of Burn Multiple from a private analysis of over 200 VC-backed SaaS companies with $1 - $15m in Annual Recurring Revenue.

About Our Data & SaaS Company Benchmark Report

Whether you’re planning to raise funding or preparing your worst-case scenario, it’s more important than ever to have a razor-sharp understanding of what good performance looks like and which metrics are the markers of a healthy SaaS business. You can view the entire benchmark report, including which companies we analyzed, here.

For this report, we analyzed 439 private SaaS companies with $1 - 15m Annual Recurring Revenue. The data reflects actual financial performance, sourced directly from companies’ own records. We believe it is the largest dataset of its kind that is based on financial actuals, rather than survey data. When specifically analyzing Burn Multiple, however, our data is based on information from over 200 VC-backed SaaS companies with $1 - $15m in Annual Recurring Revenue.

We then compared the performance of these private companies against 43 SaaS businesses that went public in 2020 and 2021. Data on public SaaS performance was sourced from their S-1 filings.

Or, for more analyses of important SaaS benchmarks, see our findings on: