Runway

Quick Definition

The amount of time a company can continue operating at its current burn rate before running out of cash.

Runway is brutally simple: it's how many months you have before you run out of money. It's calculated by dividing your current cash balance by your monthly net burn rate.

If you have $600K in the bank and you're burning $50K per month, you have 12 months of runway. That's your deadline. You need to either become cash flow positive, raise more funding, or shut down before that clock hits zero.

Most experienced founders maintain at least 12-18 months of runway at all times. Why? Because raising capital typically takes 6-9 months from start to close, and you never want to fundraise from a position of desperation. Running out of runway kills more startups than bad products.

Smart founders track runway weekly and start fundraising when they have at least 9 months left. They know that 'just in time' fundraising is a recipe for accepting bad terms or running out of cash during a market downturn.

How to Calculate Runway Step by Step

Step 1: Check your actual cash balance. Log into your bank account — not your accounting software. You want the real number sitting in your accounts right now, including any savings or money market accounts earmarked for operations. Exclude restricted cash (security deposits, escrow).

Step 2: Calculate your monthly Net Burn. Use a 3-month rolling average to smooth out lumpy months. Net Burn = total monthly cash outflows minus total monthly cash inflows.

• Average monthly expenses (last 3 months): $85,000
• Average monthly revenue received: $30,000
• Net Burn = $55,000/mo

Step 3: Divide cash by Net Burn.

• Cash balance: $715,000
• Runway = $715,000 ÷ $55,000 = 13 months

Step 4: Model scenarios. The basic calculation assumes nothing changes, but things always change. Model three scenarios:

• Base case: Current trajectory continues → 13 months
• Upside: Revenue grows 10% monthly, costs flat → 18+ months
• Downside: You lose your biggest customer and hire two engineers → 8 months

Your fundraising timeline should be based on the downside case, not the base case.

Step 5: Set your fundraising trigger. Start active fundraising when runway hits 9-12 months. At 6 months, you're negotiating from weakness. The best founders treat runway as a countdown clock and check it weekly.

Common mistakes founders make:

• Using revenue projections instead of actual collected revenue
• Forgetting about upcoming large expenses (annual contracts, tax payments, new hires)
• Not accounting for the 4-6 week lag between closing a round and receiving wire
• Confusing accounting cash (includes receivables) with bank cash

Skip the spreadsheet. Futureproof projects runway automatically from your live bank and billing data, runs scenario analysis, and alerts you when it's time to start fundraising.

Formula

Runway (months) = Cash in Bank ÷ Monthly Net Burn Rate

Extended Runway

= (Current Cash + Expected Revenue - Fixed Costs) ÷ Net Burn

Example

Your startup situation:

• Cash in bank: $750,000
• Monthly revenue: $30,000
• Monthly expenses: $80,000
• Net burn: $50,000/month

Runway = $750,000 ÷ $50,000 = 15 months

You should start fundraising conversations now. By the time you close a round (6-9 months), you'll still have healthy runway and negotiating leverage.

Related Terms

[Burn Rate The rate at which a company spends its cash reserves, typically measured as net cash spent per month.]

[Gross Burn vs Net Burn Gross burn is total monthly spending; net burn is spending minus revenue, showing actual monthly cash consumption.]

[Cash Flow The movement of money into and out of a business, showing actual liquidity rather than accounting profit.]