Runway
RUN-way
How many months a startup can operate before running out of cash. Cash in the bank divided by monthly net burn.
Runway is the number of months until your bank account hits zero. Take your current cash balance, divide by your monthly net burn, and that is your runway. $3M in the bank, $200k/month net burn: 15 months of runway.
Runway is the most important number at any startup that is not profitable. It determines every major decision: when to fundraise, when to hire, when to cut costs, when to pivot. A company with 24 months of runway can take risks. A company with 6 months of runway is in survival mode.
The standard advice is to start fundraising when you have 9-12 months of runway. Fundraising takes 3-6 months for most companies. If you wait until you have 6 months left, you are negotiating from desperation. Investors can smell it.
Examples
A startup calculates runway after a raise.
A startup raises a $15M Series A. They had $2M in the bank and burn $500k/month net. New cash balance: $17M. At current burn, runway is 34 months. The board and investors are comfortable. The company has time to experiment and grow.
Runway gets dangerously short.
A company has $1.5M left and burns $250k/month. Runway: 6 months. The CEO starts fundraising but VCs sense desperation. Term sheets come in at a 40% discount to the last valuation. The company accepts because the alternative is shutting down in 6 months.
Extending runway through cost cuts.
A startup has 8 months of runway. They cut marketing spend by 60%, renegotiate cloud contracts, and delay three hires. Net burn drops from $400k to $250k. Runway extends from 8 to 13 months. That extra time lets them hit a growth milestone that unlocks a better fundraise.
In practice
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Frequently asked questions
How much runway should a startup have?
18-24 months after each fundraise. This gives you 12-18 months to hit milestones and 6 months to raise the next round. If you have less than 12 months, start cutting costs or fundraising immediately.
Does runway include projected revenue growth?
Be conservative. Calculate runway using current net burn, not projected improvements. If you assume revenue will double next quarter and it does not, you will run out of cash faster than expected. Use current numbers for planning and treat revenue growth as upside.
Related terms
How fast a startup spends cash each month. Gross burn is total spending. Net burn subtracts revenue. The clock on your runway.
Monthly cash spending minus monthly revenue. The actual rate at which your bank account is shrinking. The number that determines runway.
The actual movement of cash in and out of your business. Different from revenue because it includes timing of payments, not just accrual accounting.
The first significant round of funding for a startup, typically raising $1-5M to validate the product and find initial customers.
The first major institutional funding round, typically $5-20M, raised after a startup demonstrates product-market fit and initial traction.
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