What does the burn rate of a start-up indicate?

The burn rate of a start-up indicates the efficiency of capital utilization, particularly in the context of how quickly a company is spending its available funds to operate before generating a positive cash flow. It is calculated as the rate at which a start-up is losing money, typically expressed on a monthly basis, indicating how long the current financial resources will last at that spending rate.

Understanding a start-up's burn rate is crucial for assessing its financial health and sustainability, especially in the early stages when investment may outpace revenue. A low burn rate suggests that a start-up is efficient in using its capital, while a high burn rate may signal potential financial issues or that a company is investing aggressively in growth.

In contrast, the other options address different aspects of business performance. The rate of employee turnover focuses on workforce stability rather than capital management, while the lifespan of the business model and the growth rate of the customer base pertain more to strategic longevity and market dynamics, respectively, rather than directly reflecting how effectively a start-up is utilizing its capital resources.