Runway is the number of months your startup can operate before it runs out of cash. It's not an abstraction — it's a countdown timer. Every founder should know their runway to within one month at all times, updated whenever a significant expense or revenue change occurs.
Most founders know their cash balance but underestimate their burn rate. They forget quarterly bills, upcoming renewals, planned hires, and the tax provisions they'll need. Optimistic burn estimates are how startups run out of money three months before they expected to.
The Runway Formula
Runway uses net burn — what actually leaves your bank account each month after revenue comes in.
Gross Burn vs Net Burn
These two numbers tell you different things. Gross burn tells you how expensive your operation is. Net burn tells you how fast your cash is depleting. Both matter.
| Metric | Formula | What it tells you | When to use |
|---|---|---|---|
| Gross burn | Total monthly expenses | How expensive your operation is | Operational efficiency, benchmarking |
| Net burn | Expenses − Revenue | Actual cash depletion rate | Runway calculation — always use this |
| Runway | Cash ÷ Net burn | Months before cash = £0 | Planning, fundraising timing |
| Default alive | Revenue growth > burn rate | Can you survive without new funding? | Existential strategy decisions |
Default Alive — The Question That Changes Everything
Paul Graham coined the term "default alive" to describe startups on a trajectory to profitability without raising more money. The opposite is "default dead" — you'll run out of cash before reaching profitability unless you raise more.
The brutal truth is that most founders are default dead and don't know it. They're counting on the next fundraise to happen exactly when they need it. It won't always.
Current state: £0 revenue, £22K/month burn, 8.2 months runway. The company is default dead unless it can reach profitability in 8.2 months.
Scenario A: Revenue grows by £3K/month each month from a standing start. By month 7: £21K MRR, almost break-even — default alive.
Scenario B: Revenue grows by £1K/month. By month 8: £8K MRR, still £14K/month net burn, cash running out — default dead. Must raise or cut burn.
▸ CALCULATE_RUNWAY
Model your runway and burn rate in real time
Enter your cash balance, monthly expenses, and current revenue. See your runway, burn rate, and what changes extend it most.
Calculate My Runway →How Much Runway Before Fundraising?
Fundraising takes longer than founders expect. Here's the typical timeline and what that means for when you need to start.
| Stage | Typical Timeline | What This Means |
|---|---|---|
| Build investor list + warm up | 4–6 weeks | Start networking before you need money |
| First meetings to term sheet | 8–16 weeks | The process takes longer than you think |
| Due diligence + legal | 4–8 weeks | Solicitors slow everything down |
| Total: first outreach to cash | 3–6 months | Do not start this at 3 months runway |
| Start fundraising when runway = | 9–12 months | This gives you a buffer if it takes longer |
What to Do at Each Runway Threshold
Different runway levels call for different responses. The worst thing you can do is wait too long to act.
How to Extend Runway: Cut Burn vs Grow Revenue
There are only two ways to extend runway: reduce what you spend or increase what you earn. The best outcome usually involves both. Here's how they compare.
Frequently Asked Questions
How do you calculate startup runway?
Runway (months) = Cash on Hand ÷ Monthly Net Burn Rate. Net burn = monthly expenses − monthly revenue. For example: £180,000 in the bank with £22,000 monthly expenses and £0 revenue = 8.2 months runway. If you have £5,000 in monthly revenue, net burn = £17,000 and runway extends to 10.6 months.
What is the difference between gross burn and net burn?
Gross burn is your total monthly cash outflow — all expenses regardless of revenue. Net burn is gross burn minus revenue. Net burn is what actually depletes your bank account. A company spending £30K/month with £12K revenue has £30K gross burn and £18K net burn.
How much runway should I have before raising?
You should start your fundraising process when you have at least 6 months of runway remaining — ideally 9–12 months. Fundraising typically takes 3–6 months from first outreach to money in the bank. If you start too late, you negotiate from desperation. Investors can smell 30-day runway from a mile away.
What is 'default alive' for a startup?
Default alive means: if you don't raise any more money, will your startup reach profitability on current cash? The formula is: Default Alive = (Cash on Hand + projected cumulative revenue) > projected cumulative expenses before cash runs out. Paul Graham considers this the most important question a startup founder should know the answer to at all times.
▸ CALCULATE_RUNWAY
Model your runway and burn rate in real time
Enter your cash balance, monthly expenses, and current revenue. See your runway, burn rate, and what changes extend it most.
Calculate My Runway →