What funding runway means
Runway is the number of months a company can keep operating before its cash runs out, if nothing changes. It is the single most watched number in an early-stage company, because it tells you how long you have to reach profitability or raise more money.
Runway depends on two things: how much cash you have, and how fast you spend it. The spending side is called burn.
How to calculate runway
Start with net burn, the cash you lose each month after revenue comes in.
- Add up monthly expenses: payroll, rent, software, ads and everything else that leaves the bank.
- Subtract monthly revenue, the cash you actually collect from customers.
- Divide the cash in the bank by that net burn.
A worked example:
- Cash in the bank: $600,000
- Monthly expenses: $80,000
- Monthly revenue: $30,000
Net burn is $50,000 a month, so the cash lasts 12 months. With an 18-month target, the company could cut monthly costs by $16,667 (net burn down to $33,333) or raise $300,000.
Gross burn and net burn
Gross burn is total monthly spending. Net burn is spending minus revenue. Runway uses net burn, because revenue pays for part of the costs.
Gross burn still matters. If the same company lost all its revenue, its runway would fall from 12 months to 7.5 months ($600,000 ÷ $80,000). Pre-revenue companies have the same gross and net burn.
Adding growth to the forecast
The simple formula assumes burn stays flat. In practice revenue grows and so do costs as you hire. The calculator projects each month separately when you add monthly growth rates.
In the example, revenue growing 5% a month while expenses grow 1% a month stretches runway from 12 months to 13.8 months, because burn shrinks a little each month. If expenses grow faster than revenue, runway gets shorter than the simple number suggests.
Keep growth assumptions honest. A rate you hit for two months is not a rate you can count on for two years. Run a cautious case too.
Default alive or default dead
A company is default alive if, on its current numbers, revenue overtakes expenses before the cash runs out. It is default dead if it needs to raise money or change course to survive.
The sample company is default dead: with flat costs and no revenue growth, it never reaches break-even. The calculator works out the monthly revenue growth that would change that. Here it is 5.1% a month, held for the whole period, with costs flat.
Knowing which side you are on changes priorities. A default-alive company can raise from a position of strength or not raise at all. A default-dead one should treat fundraising or cost cuts as urgent.
How much runway is enough
It depends on stage, market and how long your raises take, but some rules of thumb are common:
- 18 to 24 months after a round is a common aim, so the next milestone is reached before money gets tight.
- 12 to 18 months is when many founders start preparing the next raise.
- Under 12 months, raising becomes urgent, because rounds often take several months to close.
- Under 6 months, cutting burn is usually the fastest way to buy time.
How to extend your runway
- Cut the costs that don't drive growth. Unused software, agencies and roles that can wait.
- Collect cash sooner. Annual upfront billing brings cash forward without changing revenue.
- Grow revenue efficiently. Channels with low acquisition costs add revenue without adding much burn.
- Raise before you need to. Investors notice when a company is short of cash.
- Recalculate monthly. Burn tends to creep up as the team grows.
Common mistakes include counting money you can't spend yet, forgetting annual bills like insurance or tax, and treating booked revenue as cash before it is collected.
Related tools
See how many sales cover your costs with the Break-Even Point Calculator, project a year of revenue from this month with the Revenue Run Rate Calculator, and check your balance of growth and profit with the Rule of 40 Calculator. If revenue growth is the lever you need, our outbound lead generation service builds pipeline without a big ad budget.