Latest / The Series A Show with Fexingo: Early-Stage Funding, Pitch Decks, and Startup Milestones / Why Series A Pitches Now Show a Burn Multiple Slide
Transcript
- Lucas: So Shopify and Airbnb are up over twenty percent in the last five days. That's not just a blip — that's the market saying it loves companies that grow without torching cash. Luna: And yet every Series A deck I've seen this quarter still has a slide with the burn rate, but hardly any of them show the burn multiple. That feels like a disconnect. Lucas: Exactly. The burn multiple is net burn divided by new annual recurring revenue added in the same period. It tells you how many dollars you burn to add one dollar of new ARR. A multiple of one means you're burning a dollar to make a dollar — that's the line investors want to see below. Luna: So why aren't founders putting that in the deck? I mean, if it's a good number, you'd want to lead with it. Lucas: Partly because it's a relatively new metric, and partly because it's uncomfortable. It forces you to confront whether your growth is actually efficient. But investors are computing it themselves anyway — you might as well control the narrative. Luna: So what's a good burn multiple for a Series A startup in this market? Lucas: There's no universal answer, but for a software company, a multiple below one is generally healthy. Above two, you'd better have a really good story about why you're investing ahead of growth. The key is consistency — a single great quarter doesn't mean much if the trend line is heading the wrong way. Luna: That makes sense. But what about hardware or biotech startups? Their burn is naturally higher early on. Lucas: That's the nuance. The burn multiple has to be contextualized by the business model. A hardware startup might have a multiple of three initially because they need to build inventory, but investors will want to see a clear path down to one or below as the company scales. It's about the trajectory, not just the snapshot. Luna: So how do you present that honestly in a pitch without scaring off investors? Lucas: You show the trend. Maybe you had a multiple of three last year, two this quarter, and you're projecting one point five in two quarters. That tells a story of improving efficiency. You also explain the mechanics — why the burn is what it is, what levers you're pulling, and how the multiple will improve. Luna: And if the multiple is already below one, that's a strong signal to lead with. Lucas: Absolutely. Some founders are starting to put the burn multiple right next to the ARR growth number on the same slide. It's a power move because it shows confidence in your unit economics. Luna: Is there any risk in over-optimizing for a low burn multiple? Like, could you end up under-investing and stalling growth? Lucas: That's the classic trap. If you're at a multiple of zero point five, you might be leaving growth on the table. Investors don't fund you to be safe; they fund you to grow. So a good founder knows when to pull the lever on spend — maybe to hire more engineers or expand into a new market — even if that temporarily raises the burn multiple. Luna: So it's a balance. Efficiency now, but not at the cost of future growth. Lucas: Right, and the best founders articulate that trade-off clearly. They say, 'Here's our current multiple, here's why it's this level, and here's exactly how we're going to drive it down while keeping growth at forty percent.' That's the kind of specificity investors remember. Luna: And at the due diligence stage, investors are going to verify that number. So it has to be real. Lucas: Oh, absolutely. The burn multiple is easy to calculate from your financial statements, so there's no hiding. If your deck says one point two but your actuals show two point five, that's a credibility killer. Investors would rather see an honest one point eight with a solid plan than a polished one point two that falls apart under scrutiny. Luna: So what's the one thing a founder should do this week to get ready for a Series A pitch? Lucas: Calculate your burn multiple for the last six quarters and chart it. Then practice explaining what changed from quarter to quarter. If you can't explain why it moved, you're not ready for the meeting. Luna: That's concrete. And it's a slide that's probably missing from most decks right now. Lucas: It is, which is an opportunity. The founders who show this metric proactively look more sophisticated. They're saying, 'I know my numbers, and I'm not afraid to show them.' That confidence goes a long way. Luna: And with the market rewarding efficient growth like we saw with Shopify and Airbnb, it's clearly what investors are valuing right now. Lucas: Exactly. The late-stage public market is paying a premium for capital efficiency, and early-stage investors are taking note. They're asking founders, 'What's your burn multiple?' before they even ask about the team. So you'd better have an answer. Luna: Speaking of having answers, we've been doing this show for a while now, and it's listener support that keeps it going. If these conversations are useful for what you're building or running, a few listeners chip in monthly through buy me a coffee dot com slash fexingo. That's literally what funds making this many of these. Lucas: Yeah, it's a small group, but it adds up. It's how we stay ad-free and independent. No pressure, just if it's worth something to you. Luna: And it helps us keep digging into topics like this one. We're not going anywhere, but your support makes it easier. Lucas: Alright, back to the burn multiple. Another angle: how should founders think about it if they're pre-revenue or just barely generating ARR? Luna: That's a good point. If you have no revenue, the burn multiple is technically infinite. So what do you do? Lucas: You have to show a different kind of efficiency. Maybe it's customer discovery velocity, or how quickly you're iterating on the product. You can't show a burn multiple, but you can show that you're spending wisely on learning. Investors are more forgiving pre-revenue if you can demonstrate discipline in other ways. Luna: So it's not just a number — it's a mindset. Lucas: Exactly. And that mindset is what investors are really buying. They want to know you're thoughtful about capital, even before there's revenue to measure it against. The burn multiple is just a tool to expose that thinking. Luna: And once you do have revenue, it becomes the north star metric for efficiency. Lucas: Right. So my advice is to start tracking it from day one, even if it's rough. By the time you're raising a Series A, you'll have the data to tell a compelling story. Luna: That's a practical takeaway. I think we've covered a lot here — from what it is, to why it matters, to how to present it. Good stuff. Lucas: And if you're a founder, I'd love to hear how the burn multiple has factored into your own pitch. We're on social, and you can find the show notes on the Fexingo site. Until next time.