Both Magic Number and Burn Multiple are capital efficiency metrics popularized by David Sacks and used in venture diligence. They answer related but different questions.
Magic Number: GTM efficiency
Magic Number = Net New ARR / Prior-quarter S&M spend
Measures how efficiently your sales and marketing converts spend into ARR. Ignores R&D, G&A, and COGS — focused purely on go-to-market.
Burn Multiple: Total efficiency
Burn Multiple = Net Cash Burn / Net New ARR
Measures how much total cash you spend per dollar of net new ARR added. Includes all spending: S&M, R&D, G&A, infrastructure, headcount.
When they diverge
A company can have an excellent Magic Number (efficient S&M) but a poor Burn Multiple if R&D or G&A spending is high relative to growth. Conversely, a poor Magic Number with low total burn might mean you're growing slowly but frugally.
Use both together: - Magic Number tells you if GTM is efficient - Burn Multiple tells you if the whole business is efficient
Calculate your Magic Number at the Magic Number Calculator.