burn rate

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Burn rate

Used in venture capital financing to refer to the rate at which a startup company expends capital to finance overhead costs prior to the generation of positive cash flow.

Burn Rate

The amount of money that a company spends each month from the amount it has raised from venture capital. For example, if a company is spending $100,000 per month, it is said to have a burn rate of 100,000. The burn rate is measured until the company begins to have a positive cash flow. If the burn rate exceeds expectations or cash flow remains negative for too long, the company may have a difficult time becoming profitable.

burn rate

The speed with which a company consumes cash, generally stated on a monthly basis. A high burn rate indicates a firm will soon be out of business unless it can raise additional capital, dramatically increase cash sales, or reduce expenses. The burn rate was particularly high for dot-com companies that placed emphasis on capturing market share rather than profitability.
References in periodicals archive ?
Assuming work is performed every day of the year, we calculated a burn rate over $800,000 per day ($600 million divided by 730 days equals $822,000 per day).
Section 404, Director Performance and Tally Sheet Policies are Added, While Majority Vote, Burn Rate and Other Policies are Tuned
While not sounding a long time using traditional businesses as a yardstick, the 20-month figure still seems like an eternity compared with the average burn rate of 13 months reported in December.
B2C firms typically have a burn rate of 15 months, while their B2B rivals survive an average 23 months.
Some companies with short burn rates have strong share price performances.
We expect the affected kiln will be able to meet the BIF regulations and return to normal burn rates within the next several months.
The cash burn rate for HostPro during the third and fourth quarters of fiscal 2001 combined is projected to be $14-16 million.