What runway tells you and when to act
Runway is the number of months your business can continue operating at the current burn rate before running out of cash. It is the single most important number a founder should know at all times. A business with 18 months of runway has time to iterate, hire, and close a fundraise with leverage. A business with 3 months of runway is in emergency mode and will accept worse terms, make hasty hires, and lose the ability to say no.
The rule of thumb investors use: start your next fundraise when you have 6 months of runway left. A fundraise typically takes 3 to 6 months to close. Waiting until you have 3 months means you are already too late unless you can cut costs immediately to extend runway while the round closes.
The formula
Net monthly burn = Gross burn − Monthly revenue
Runway (months) = Cash in bank ÷ Net monthly burn
With revenue growth:
Simulate month by month, growing revenue each month
Runway = first month where cash balance reaches zero
Default alive threshold:
Revenue needed to reach default alive = Gross burn (covering all costs)
Default alive means the business will become profitable before running out of cash at current trajectory. Paul Graham coined the term. A business is default alive if projected revenue growth will cover costs before cash hits zero.
Runway health benchmarks
| Runway | Status | What to do |
|---|
| > 18 months | Comfortable | Focus on growth, start next raise in 12 months |
| 12 – 18 months | Healthy | Start fundraise prep now, 6 months to close |
| 6 – 12 months | Caution | Start fundraising immediately or cut burn |
| 3 – 6 months | Urgent | Cut burn today and raise simultaneously |
| < 3 months | Critical | Bridge round, emergency cuts, or wind down |
Frequently Asked Questions
How is runway calculated?+
Runway is your current cash balance divided by your net monthly burn rate. Net burn is gross spending minus any monthly revenue. If you have $600,000 in the bank and you spend $80,000 per month but collect $30,000 in revenue, your net burn is $50,000 per month and your runway is 12 months. If revenue is growing, the calculation becomes a month-by-month simulation where each month revenue increases and net burn decreases, which can extend runway significantly compared to the static formula.
When should I start fundraising?+
Start your next fundraise when you have at least 6 months of runway remaining. A seed or Series A round typically takes 3 to 6 months from first meeting to money in the bank, and that assumes things go well. Starting at 6 months gives you a buffer if the process takes longer or initial investors pass. The best time to raise is when you do not desperately need the money: you have strong metrics, multiple months of growth, and time to be selective about who you take money from. Raising in desperation forces you to accept worse valuations and terms.
What is the difference between gross burn and net burn?+
Gross burn is your total monthly spending before any revenue. Net burn is gross burn minus the revenue you collect each month. Investors care about both. Gross burn tells them what the cost structure looks like without revenue. Net burn tells them how fast you are actually consuming cash. A business with $100,000 gross burn and $80,000 revenue has $20,000 net burn and is nearly self-sustaining. A pre-revenue business has gross burn equal to net burn. As you grow revenue, net burn decreases and runway extends even if you do not cut costs.
What does default alive mean?+
Default alive means your business will reach profitability before running out of cash, assuming current growth rates and no additional funding. If you are growing revenue at 20% per month and your current net burn is $50,000, you will eventually grow into profitability before you hit zero. Default dead means the opposite: at current trajectory you will run out of cash before revenue covers costs. Knowing whether you are default alive changes the strategic context entirely. A default alive business can choose to raise on good terms or not raise at all. A default dead business must raise to survive.
How much should I cut costs to extend runway?+
The most effective cost cuts are those that do not reduce revenue-generating capacity. Marketing spend is often cut first, but cutting channels that directly drive customer acquisition can reduce future revenue and worsen the long-term position. The highest-leverage cuts are usually non-customer-facing overhead: office space (switching to remote), non-critical software subscriptions, contractors on non-core work, and planned hires that can be deferred. Every $10,000 of monthly cost reduction adds months of runway equal to cash divided by the new lower net burn. Use the cut scenario in this calculator to model the impact of a specific percentage reduction.
How much cash should a startup keep as a buffer?+
The minimum safe runway threshold most advisors recommend is 12 months, which gives enough time to close a fundraise with a buffer if it takes longer than expected. Many experienced founders target 18 to 24 months of runway after a raise to have time to reach the milestones that will make the next round possible at an improved valuation. Pre-revenue startups need more runway because they are more dependent on fundraising than revenue. Revenue-generating businesses that are approaching breakeven can operate with less runway because they have the option to cut to profitability if the fundraising environment deteriorates.