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.