Burn Rate

What Does Burn Rate Mean?

Burn rate is the pace at which a startup company goes through its cash reserves. Although burn rate is not exclusively a tech term, it rose to prominence with the dot-com boom. A company with a high burn rate is faced with either securing more venture capital and diluting its existing equity, or eventually going under.


Techopedia Explains Burn Rate

During the dot-com bubble, tech start-ups had access to an unprecedented amount of capital and they went through it very quickly. Although some investors were worried by the speed at which cash was disappearing, others looked at a high burn rate as an opportunity to swoop in late and grab up more equity. The bursting of the bubble caused a re-evaluation of tech investing and resulted in later start-ups having to adjust to much less available cash and expectations of much lower burn rates.


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Margaret Rouse

Margaret Rouse is an award-winning technical writer and teacher known for her ability to explain complex technical subjects to a non-technical, business audience. Over the past twenty years her explanations have appeared on TechTarget websites and she's been cited as an authority in articles by the New York Times, Time Magazine, USA Today, ZDNet, PC Magazine and Discovery Magazine.Margaret's idea of a fun day is helping IT and business professionals learn to speak each other’s highly specialized languages. If you have a suggestion for a new definition or how to improve a technical explanation, please email Margaret or contact her…