What is Cash Burn?
Net Cash Burn measures the amount of cash reduction in a period.
Cash burn is usually identified in two main ways: Net Burn and Gross Burn. Both of these are necessary measurements, but at Element, we focus on Net Burn.
Did you know, more than 80% of startup failures are due to mismanaged cash burn?
What is Net Cash Burn?
Cash is king. To keep your team afloat, you need cash in the bank. So understanding the ebbs and flows of your bank account balance is a vital skill. That's why we look at Net Cash Burn, the amount of cash that leaves your bank account every month (not including extraordinary incomes from grants or investments).
At Element, we want our funds to be able to provide a strong runway for our borrowers. If your monthly Net Cash Burn is $xx, we want to make sure we can lend at least 6-9 months worth your monthly cash burn.