What runway means
Runway is how many months a company can keep operating before its cash runs out, assuming spending and revenue stay where they are. For startups that are not yet profitable, it is the number that decides when to raise money, cut costs or change course.
The formulas
- Gross burn = total monthly operating expenses
- Net burn = gross burn − monthly revenue collected
- Runway = cash in the bank ÷ net burn
Worked example
| Item | Amount |
|---|---|
| Cash in the bank | $500,000 |
| Monthly expenses | $60,000 |
| Monthly revenue | $20,000 |
- Net burn: 60,000 − 20,000 = $40,000 a month.
- Runway: 500,000 ÷ 40,000 = 12.5 months.
- With a 10% cut in expenses: net burn 34,000, runway 14.7 months.
- If raising takes about 6 months, the process should start within 6.5 months.
How much runway you need
| Runway | Situation |
|---|---|
| Under 6 months | urgent: cut costs or secure bridge funding |
| 6 to 12 months | start fundraising now, or plan cuts |
| 12 to 18 months | comfortable, keep an eye on milestones |
| 18 to 24 months | typical target right after a round |
Fundraising usually takes three to six months from first meetings to cash in the bank, longer in a tight market. Investors are also more cautious with companies that are close to running out of money.
Making the estimate realistic
- Use cash actually collected, not invoiced revenue or annual contracts not yet paid.
- Include planned hires: a new salary next quarter shortens runway immediately.
- Add one-off costs such as annual software renewals, insurance, taxes and legal fees.
- Model revenue growth separately: if revenue grows faster than costs, net burn falls each month and runway is longer than this simple calculation shows.
Default alive or default dead
A company is “default alive” if, at current growth and costs, it reaches profitability before cash runs out. Checking this every month, alongside runway, tells founders whether they control their timeline or depend on the next round.
This calculator gives estimates for education and planning. It is not investment, tax or legal advice; for decisions about your own situation, talk to a qualified financial professional.