Burn Rate

The rate used to convert a single-period earnings or cash flow figure into an indication of value, calculated as the discount rate minus the expected long-term sustainable growth rate. The capitalisation rate is the reciprocal of the capitalisation multiple and is used in the capitalisation of earnings method for businesses with stable, predictable income streams.

The annualised rate of return at which the net present value of all cash flows from an investment equals zero. IRR is the standard performance metric for private equity and venture capital funds, allowing comparison across investments with different holding periods and cash flow profiles.

The proportion of available capacity — whether labour hours, machine time, or service capacity — that is actually deployed in productive activity. Utilisation rate is a key productivity metric for professional services, manufacturing, and SaaS infrastructure, directly influencing revenue efficiency and operating margins.

The rate at which a company integrates and derives value from acquired assets, particularly intangible assets such as technology, talent, and customer relationships following a merger or acquisition. A high absorption rate indicates effective post-deal value capture and is a key indicator of M&A success.

The proportion of tasks, processes, or workflows within an organisation that are performed by automated systems rather than human labour. Automation rate is a key productivity metric, with higher rates typically correlating to improved operational efficiency, reduced error rates, and scalability — though the transition period often involves significant restructuring costs.

A controlled regulatory environment established by a financial regulator that allows fintech companies to test innovative products, services, or business models with real customers under relaxed regulatory requirements and close supervisory oversight. The UK Financial Conduct Authority pioneered the concept in 2016, and sandbox programmes now operate in over 50 jurisdictions worldwide.

The minimum rate of return that a fund must achieve before the general partner becomes entitled to carried interest, or the minimum acceptable return for an investment decision. Hurdle rates are typically set between 6% and 8% in PE/VC fund structures and serve as a performance benchmark that aligns manager and investor incentives.

The total fee charged to a merchant for processing a payment card transaction, expressed as a percentage of the transaction value plus a fixed per-transaction fee. The MDR comprises three components: the interchange fee (paid to the issuing bank), the card network assessment fee (paid to Visa/Mastercard), and the acquirer's markup.

The Burn Multiple: Why Capital Efficiency Is the New Growth

The burn multiple has replaced growth rate as the metric investors scrutinise most. This guide explains the formula, stage-specific benchmarks, and why every dollar of burn should be creating an intangible asset that compounds in value.

What is burn rate and runway?

Burn rate is monthly cash spending; runway is current cash divided by monthly burn rate, indicating how many months until capital runs out.

What are realistic burn rates and how do you avoid misrepresenting runway?

Founders often calculate optimistic runway (assuming perfect cost control) when actual burn is higher. Honest runway = (cash on hand) / (conservative monthly burn + 3-month buffer).

How do you select the appropriate discount rate for intangible asset valuations?

Discount rates for intangible assets should reflect the asset-specific risk profile, typically ranging from WACC for lower-risk assets like customer relationships to WACC plus a premium for higher-risk assets like in-process R&D.