Burn Rate, Runway, CAC: The 3 Metrics Investors Judge First

Startups live in a state of controlled chaos. Every dollar, every decision, is a bet. And while you feel that chaos every day, investors see only the numbers. They’re looking for patterns.

The story they read in your is built on three numbers: Burn Rate, Runway, and CAC. Master these, and you control the narrative. And if you don't control that narrative, it controls you.

Burn Rate: The Financial Metabolism

Burn rate is the simple, brutal truth of your cash out the door. It measures how quickly your company is spending its cash reserves each month. Forget the P&L; investors care about the actual speed your cash is disappearing. This is why you need to distinguish between Gross and Net Burn. 

Your Gross Burn is the sum of all cash-based operational expenses: salaries, software, rent. It's the total cost of keeping the lights on. But what truly dictates your survival is Net Burn. This is your Gross Burn minus any cash revenue. Spend $100k, make $20k? Your Net Burn is $80k. This is the number draining your reserves and the one investors scrutinize.

Investors look at your burn rate not as a simple number, but as a strategic indicator. A high burn rate can signal aggressive, high-stakes moves for market dominance, as seen with Uber in its early days.

Uber strategically subsidized rides to rapidly gain market share, a move that justified significant cash burn. But for every Uber, there are many startups whose high burn is a death sentence because it doesn't lead to defensible growth. Your burn must be tied to a return; be it user growth, market share, or product development. If it's just reckless spending, it's cash destruction.

Runway: The Financial Countdown

Runway is the number of months you have until you’re out of cash. It's calculated by dividing your total cash balance by your monthly net burn. This number is your most critical survival metric. A short runway ‘less than 12 months’ creates a desperate, pressured fundraising environment. A long runway ‘ideally 18-24 months’ shows strategic foresight. It buys you time to hit milestones and negotiate from a position of strength. 

During its early struggles, Airbnb famously sold themed cereal boxes to stay afloat. This non-traditional cash infusion bought them enough time to iterate their product and secure crucial funding. Founder Brian Chesky recalls the panic, the credit card debt, and the investor rejections. The cereal box hustle, while seeming absurd, demonstrated a level of grit and resourcefulness that ultimately won over Y Combinator's Paul Graham. 

The takeaway: a longer runway is more than just a buffer; it is a strategic asset that provides options and reduces the pressure to make rash decisions. This allows founders to focus on building a real business, not just surviving another month.

Investors see a short runway as a high-risk gamble, knowing desperation weakens a founder's bargaining position. A longer runway proves you are a stable, well-managed company that is raising money to accelerate growth, not just to stay alive. The financial climate also influences investor expectations.

In tougher markets, a longer runway of 24-36 months may be preferred. This is because it provides a buffer against unforeseen challenges and allows the company to focus on executing its plan without the constant distraction of a looming cash crunch.

Explore more: Cut your monthly business expenses.

CAC: The Cost of Growth

Every business needs to grow. But at what cost? Your Customer Acquisition Cost (CAC) answers that. It’s the total cost of sales and marketing to acquire a new customer, divided by the number of new customers you acquired. This financial metric reveals the efficiency of your growth engine.

But don’t just give an average cac. Investors want to see CAC broken down by channel. What's the CAC for your paid social? For content marketing? For outbound sales? A channel-level view shows where your growth is efficient and where it's a money pit.

For example, in 2025, the average CAC for B2B SaaS was around $702, while it was much lower for B2C e-commerce, around $66 for apparel. This data tells you where your spending sits relative to the market and where you need to optimize.

Customer Acquisition Cost is meaningless without context. The key is to compare it to your Customer Lifetime Value (LTV). A healthy LTV:CAC ratio is generally considered to be 3:1 or higher. A low ratio signals an unsustainable growth model; a high one means you've built a growth machine. Pets.com is a classic cautionary tale of unsustainable CAC.

Their expensive Super Bowl ads in 2000 drove a ton of awareness, but their CAC far outpaced their LTV, leading to their spectacular failure during the dot-com bubble. In contrast, Dropbox famously built a viral growth engine by offering free storage for referrals, resulting in an exceptionally low CAC.

Frequently Asked Questions

Q: How do you calculate a startup’s runway?

Runway is calculated by dividing your total cash balance by your monthly net burn rate. For example, if you have £240,000 in cash and spend £20,000 per month, your runway is 12 months. It shows how long your business can operate before needing new funding.

Q: What’s the difference between gross burn and net burn rate?

Gross burn is your total monthly cash outflow, including expenses like salaries, rent, and software. Net burn subtracts any cash revenue from that figure, showing the actual rate your cash reserves are declining each month.

Q: Why do investors care about burn rate, CAC, and runway?

These three metrics reveal financial discipline and growth efficiency. Burn rate shows spending pace, CAC measures the cost to acquire customers, and runway indicates survival time. Together, they help investors assess risk, sustainability, and funding needs.

Control the Narrative

These three metrics are the building blocks of your startup's financial story. Burn rate tells investors your pace. Runway tells them your timeframe. CAC tells them your engine's efficiency.

As a founder, you have to be intimately familiar with these metrics. Not just to satisfy investors, but to run your small business effectively. When you understand your financial position, you move from reactive to proactive. You can anticipate problems, make strategic adjustments, and build a stronger, more resilient company.

Calm, not cold. Confident, not clueless. When you walk into that room, don't just pitch your vision. Own your numbers. That's how you build a real business, and that's how you win investors.

This isn't a problem for someone else to solve. This is on you. The right numbers change everything. Take control of your financial story with Accountup. We provide the accounting team you need, without the overhead.