Burn multiple is a term used in venture capital (VC) to describe the amount of money that a VC firm has invested in a portfolio company relative to the company's valuation at the time of investment. The burn multiple is calculated by dividing the amount of money invested by the company's valuation at the time of investment.
For example, if a VC firm invests $1 million in a company with a valuation of $5 million, the burn multiple would be 0.2 ($1 million / $5 million).
The burn multiple is often used by VC firms as a way to measure the potential return on their investments, and it is a key factor in determining the overall performance of a VC portfolio.
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