Runway

Also known as: Cash RunwayFinancial RunwayMonths of RunwayBurn RunwayTime Before Default

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

💡The Concept

Runway is the number of months your startup can continue operating before it runs out of cash, assuming no change in revenue or expenses. It is the countdown clock of your business. Runway = Cash in Bank ÷ Net Monthly Burn. If you have $600K and burn $50K/month net, you have 12 months of runway. VCs expect funded startups to have 18-24 months of runway; anything under 6 months is an emergency. 29% of startups fail because they run out of cash — not because the product failed, but because the clock ran out.

⚠️The Trap

The trap is calculating runway based on optimistic revenue projections. Founders say 'We have 12 months of runway, but revenue should grow 20%/month so we'll be fine.' Revenue projections miss targets 70% of the time. Always calculate runway assuming ZERO revenue growth — this is your 'default alive' calculation. If you can't survive on current revenue, you're 'default dead' and need to either raise money or cut costs immediately. Also, runway shrinks faster than expected because expenses creep up — tool subscriptions, infrastructure scaling, salary increases.

🎯The Action

Calculate three versions of runway and review weekly: (1) Worst Case: Cash ÷ Net Burn (no revenue growth). (2) Base Case: Cash ÷ (Net Burn − Expected Monthly Revenue Increase). (3) Best Case: Cash ÷ (Net Burn − Aggressive Revenue). Manage to the Worst Case so you're never surprised. Set hard alerts: at 9 months, begin fundraising prep. At 6 months, start fundraising. At 3 months, emergency cuts.

⚡Pro Tips

Paul Graham's 'Default Alive or Default Dead' framework: at your current revenue growth rate and expense level, will you reach profitability before running out of cash? If yes, you're default alive. If no, you need to change something. Most startups are default dead and don't realize it.

Fundraising takes 3-6 months minimum. If you start fundraising at 6 months runway, you might close at 0 months. Start at 12+ months runway to have negotiating leverage — desperate founders accept terrible terms.

Track 'zero cash date' on a wall chart everyone can see. This creates healthy urgency without panic. The countdown is a powerful motivator for efficient spending.

🚫Common Myths

✗Myth: “More runway is always better”

✓Reality: Excessive runway without execution leads to complacency. A startup with 5 years of runway and no urgency to generate revenue is a lifestyle business, not a startup. The best-performing YC companies typically have 12-18 months of runway — enough to execute without panic, short enough to maintain urgency.

✗Myth: “Revenue growth extends runway automatically”

✓Reality: Revenue growth only extends runway if it grows faster than expenses. If you hire 3 salespeople ($30K/month) to grow revenue by $10K/month initially, your burn increases by $20K/month and your runway SHRINKS for several months before the revenue catches up. Always model the cash flow gap between investment and return.