Formula
Burn multiple = net burn ÷ net new ARR (same period, usually a quarter or a year)
Worked example
Illustrative figures. One quarter. Net new ARR includes 80,000 of FX impact.
Burn multiple = 2,400,000 ÷ 1,600,000 = 1.50
At constant currency = 2,400,000 ÷ 1,520,000 = 1.58
Net new ARR at constant currency
Translation gains reduce the multiple without any commercial improvement. Use net new ARR at constant currency, with FX impact excluded.
Net burn
Net burn is the reduction in cash from operating activity and capital expenditure, excluding financing. Large annual prepayments distort individual quarters; a trailing measure smooths them.
Interpretation
The multiple rises when growth slows or spending rises. Thresholds vary by stage and market; compare against the company’s own history and the expectations of its investors.
What Revnewed provides
Revnewed reports net new ARR every month and in 1, 3 and 12-month board-pack bridges, with FX impact on its own line so the constant-currency figure is available.
Cash burn comes from the cash flow statement and is not held in Revnewed.
Common misstatements
- FX in net new ARR
- A weaker reporting currency improves the multiple with no change in the business.
- Bookings in place of ARR
- Signed contracts that have not started add no ARR.
- Single-quarter readings
- Prepayments and one-off costs move individual quarters.