What is Startup Runway?
Runway is a financial metric that calculates the amount of time (usually expressed in months) a startup has left until it completely depletes its cash reserves. It is the ultimate measure of survival and is the most important number the CEO and CFO track.
The runway calculation is directly dependent on the Net Burn Rate (the rate at which you lose money each month).
The Formula Your runway is calculated by dividing your total cash position by your monthly net burn:
Current Cash in Bank ÷ Monthly Net Burn = Months of Runway
The 18-Month Rule Most venture capital investors aim to provide startups with 18 months of runway from the close of their funding round. This isn't a random number—it's a strategic buffer:
- 12 Months: To execute the business plan and hit the milestones required for the next round of funding.
- 6 Months: A dedicated window to actually run the next fundraising process (pitching, due diligence, closing).
If your runway drops below 12 months, you should be actively talking to investors. If it drops below 6 months, you are in a crisis.
How to Extend Runway You can extend your runway in two ways:
- Increase Revenue: Generate more sales to reduce your Net Burn.
- Cut Costs: Reduce operating expenses (e.g., lower salaries, cheaper software).
Key Takeaway: Runway is a countdown clock. It dictates when you must achieve profitability or when you must secure your next round of financing.
