Runway
The number of months a startup can continue operating before running out of cash.
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Definition
Runway is the finite clock that every startup operates against. It represents the number of months a company can continue operating at its current burn rate before exhausting its cash reserves. Runway is the most visceral metric in startups — when it hits zero, the company dies.
Runway calculation should account for expected changes in both burn and revenue. A more sophisticated model projects monthly cash flows rather than using a simple division. This is important because burn rate often increases (new hires, infrastructure) while revenue growth may be uneven.
The rule of thumb is to maintain 18-24 months of runway at all times. Start fundraising when you have 9-12 months remaining, as the average fundraise takes 3-6 months.
Why It Matters for Founders
Runway creates urgency and constrains strategy. A company with 6 months of runway makes very different decisions than one with 24 months. Short runway forces focus on immediate revenue and cuts to non-essential spending. Long runway enables experimentation, investment in long-term initiatives, and the ability to negotiate from a position of strength.
Running out of runway is the proximate cause of most startup deaths. Even if you have product-market fit, running out of cash before achieving profitability or securing the next round is fatal. Smart founders treat runway as their most precious resource and make every month count.
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Formula
Runway (months) = Cash Balance / Monthly Net Burn RateReal-World Example
A startup has $2.4M in the bank and burns $120K net per month. Their runway is $2.4M / $120K = 20 months.
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Frequently Asked Questions
How much runway should a startup have?+
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