Burn Rate vs Dilution
Burn Rate (Monthly Cash Burn) and Dilution (Ownership Reduction) both come up in business conversations and get confused. Here's the plain-English difference, side by side, so you can use each one with confidence.
The key difference: Burn Rate refers to monthly cash burn, while Dilution refers to ownership reduction — they describe different things even when they show up in the same sentence.
Burn Rate — Monthly Cash Burn
How much cash you lose each month. Burn determines runway more than revenue.
Dilution — Ownership Reduction
Your ownership shrinks as you raise. Percentage of a bigger pie can still be a win.
When to use Burn Rate
Reach for "Burn Rate" when the conversation is specifically about monthly cash burn. How much cash you lose each month. Burn determines runway more than revenue.
When to use Dilution
Reach for "Dilution" when the conversation is specifically about ownership reduction. Your ownership shrinks as you raise. Percentage of a bigger pie can still be a win.
FAQs
What is the difference between Burn Rate and Dilution?
Burn Rate stands for Monthly Cash Burn — How much cash you lose each month. Burn determines runway more than revenue. Dilution stands for Ownership Reduction — Your ownership shrinks as you raise. Percentage of a bigger pie can still be a win.
Are Burn Rate and Dilution the same thing?
No. They're often used in the same conversation because they're related, but they describe different concepts. Burn Rate = Monthly Cash Burn. Dilution = Ownership Reduction.
When should I use Burn Rate vs Dilution?
Use Burn Rate when you're specifically referring to monthly cash burn. Use Dilution when the topic is ownership reduction.