Runway
The number of months a company can operate before running out of cash, at its current spending rate.
Runway is how long a company's remaining cash will last given its current monthly net burn rate, assuming no new financing or major change in spending or revenue. It's the single most important number for a founder to know at all times, since it defines the deadline by which the company must either become cash-flow positive or raise more capital.
Runway should be recalculated regularly (monthly at minimum) since burn rate changes as headcount, revenue, and spending shift — a static runway number calculated once a quarter can badly mislead a founder about how much time they actually have left.
Every strategic decision — hiring plans, product bets, pricing changes — is implicitly a decision about runway, because each moves the burn rate and therefore the deadline. Founders who track runway monthly negotiate fundraises from strength; founders who discover it late negotiate from desperation, and the terms reflect it.
Calculate it on net burn — cash out minus cash in — averaged over the last two or three months to smooth noise. Gross burn ignores incoming revenue and understates runway for any company with real sales; quoting one number to the board while the bank account drains on the other is a classic failure mode.
Headcount shortens runway fastest, because salaries are the largest fixed cost. After that come revenue shortfalls against plan, large upfront vendor commitments, and slow collections — runway is about cash, not recognized revenue, so a company can look profitable on paper and still run out of money if customers pay late.
Runway (months) = current cash balance / average monthly net burnA company has $3M in the bank and is burning $250,000 per month net (expenses minus revenue). Runway = $3M / $250,000 = 12 months.
Start a new fundraise with at least 6 months of runway remaining, not less — fundraising typically takes 3-6 months end to end, and negotiating from a position of urgency with under 3 months of runway left badly weakens leverage on price and terms.
How much runway should a startup have before starting a fundraise?
Most experienced founders and investors recommend starting the process with at least 6 months of runway left, since raising typically takes 3-6 months and running out of leverage late in the process weakens negotiating position.
Should runway be calculated on gross burn or net burn?
Net burn — total cash outflows minus cash inflows. Gross burn ignores revenue and gives a misleading number for any company with real sales.
How can a startup extend runway without raising?
Cut burn (pause non-critical hiring, renegotiate vendor contracts, trim discretionary spend), bring cash in faster (annual prepay discounts, tighter payment terms), or use bridge financing, venture debt, or revenue-based financing — each of which has a cost to model against simply cutting.
How often should runway be recalculated?
At least monthly, tied to closing the books, with a forward projection that includes known changes like planned hires or annual prepayments.
Related terms
Run the numbers yourself: dilution, SAFE conversion, and fund-returner calculators.