TL;DR
Burn rate is the amount of cash a startup spends each month, and it's the number that determines how long your runway actually lasts.
What burn rate means
Gross burn is total monthly operating expenses. Net burn is gross burn minus revenue, and it's the figure investors watch most closely because it reflects the real cash trajectory of the business. A burn rate that rises without a proportional rise in revenue or growth is a common red flag in any pitch conversation, since it signals spend that isn't buying commensurate progress.
Burn rate isn't a single flat number month to month either. Annual costs like insurance, compliance filings or one-off legal fees hit unevenly, and a founder tracking burn only in the months those costs land can misread the underlying trend.
Why it matters for African founders
Many African startups run dollar-denominated cost lines, cloud infrastructure, payment processing fees, SaaS tools, against local-currency revenue, so a burn rate calculation that blends both currencies into one number can hide real exposure. Local currency depreciation against the dollar effectively raises real burn even when the local-currency figure looks unchanged month over month.
Common mistakes founders make with burn rate
- Reporting gross burn to investors as if it were net burn
- Not accounting for annual or lumpy costs evenly across the months they actually hit
- Ignoring currency exposure when most major costs are dollar-denominated and revenue isn't
- Cutting burn reactively after a scare instead of maintaining a rolling monthly review