Burn rate measures cash consumption per month, in two flavors that must never be confused in the same sentence. Gross burn is total cash out: payroll, rent, equipment, services. Net burn subtracts reliable cash in (grant instalments, tax-credit refunds when received, early revenue), and is the figure that divides into cash to give runway. A company stating “burn” without the adjective in a board document creates exactly the ambiguity diligence exists to catch.
Reading burn well means normalizing it. One-off items (an equipment purchase, a legal bill, an annual insurance premium) belong in a separate line, not in the monthly run rate; a founder who lets a cryostat purchase sit in the March burn figure shows a 2x spike that means nothing. The useful presentation is a run-rate burn with one-offs called out, trended over quarters.
The management discipline is tiering: which costs are committed (leases, notice periods), which are controllable within a quarter, which are discretionary today. That tiering is what turns a downside scenario from a spreadsheet exercise into an executable plan, and it is the first question a serious board asks when a milestone moves.
Quantum burn is structurally heavier and stickier than software burn: cryogenics, lasers, cleanroom or foundry access, and senior PhD salaries do not compress without cutting the roadmap itself. Tax-credit financing (SR&ED, CIR) reimburses with a lag, so accrued and received are different numbers and only the second one is runway. Investors read quantum burn against milestone progress, dollars per technical proof, which is the pre-revenue cousin of capital efficiency.
Gross burn is $200,000 a month. A $40,000 monthly grant instalment and $10,000 of paid pilot work bring net burn to $150,000 (200,000 - 40,000 - 10,000). The SR&ED refund accrued this year but received next year improves the annual accounts, not this quarter's runway; counting it as current cash is how runway models lie politely.