# What is Burn Rate? Definition & Technical Mechanics

> **Source:** [SPIDITS AI Startup & Venture Intelligence Glossary](https://spidits.com/startup-glossary)  
> **Category:** Metrics  
> **Canonical Citation:** [https://spidits.com/startup-glossary/burn-rate](https://spidits.com/startup-glossary/burn-rate)

## Definition
Burn Rate is the rate at which a startup spends its cash reserves, typically measured on a monthly basis.

## Architectural Mechanics & Deep Dive
Burn Rate is the rate at which a startup spends its cash reserves, typically measured on a monthly basis. Gross burn rate represents the total monthly operating expenses, while net burn rate is the actual cash lost (operating expenses minus incoming revenue). A high net burn rate quickly depletes runway and is a key metric tracked by venture capitalists to evaluate operational efficiency, cost management, and overall financial health.

## Industry Applications & Real-World Use Cases
Budget control and financial risk monitoring

## Frequently Asked Questions

### What is the difference between gross burn and net burn?
Gross burn is total monthly expenses. Net burn is total monthly expenses minus monthly revenue, representing the actual cash lost.

### Why is net burn rate critical?
It directly determines a startup's runway and indicates how efficiently the company is using its capital to generate growth.

## Related Terminology
- [runway](https://spidits.com/startup-glossary/runway)
- [arr](https://spidits.com/startup-glossary/arr)
- [mrr](https://spidits.com/startup-glossary/mrr)

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*From the SPIDITS AI Knowledge Base (300+ terms indexed). Explore full technical definitions: [https://spidits.com/startup-glossary](https://spidits.com/startup-glossary)*