Cash runway answers the startup question nobody enjoys asking: how many months can we keep operating before the money runs out? It is the time until cash reserves, or operating capital, are exhausted, usually measured in months. For a company spending more than it earns, runway is the practical countdown clock for survival—not an abstract finance metric. section 18.0 section 18.1
Start with burn rate: the net cash spent each month. Investors commonly look at cash in the bank and monthly burn, then divide cash by burn to estimate runway. A company with $4 million in cash and a $250,000 monthly burn has 16 months of runway. Expenses alone are not burn; net burn accounts for revenue against total expenses. section 18.1 section 18.2
Use runway to make decisions before the cliff gets close:
- Track monthly burn and remaining months of cash continuously; they are central numbers for a CEO and expected investor questions. section 18.0 section 18.4
- Increase revenue or cut expenses to reduce burn and extend runway. section 18.2
- Treat hiring choices as runway choices: employee costs, especially engineering, can be a major part of burn, while contractors may be easier to reduce if spending must fall. section 18.2
- Plan financing early enough to preserve leverage; prospective investors may offer worse terms when they see a company nearing a cash shortage. section 18.3
A useful planning target is not merely avoiding zero. Investors generally want a financing round to provide 18–24 months of runway. Below 12 months, active next-round discussions should already be underway; below six months, there should be a clear line of sight to closing. The 18-month guideline allows roughly a year to reach a meaningful revenue milestone and six months to raise the next round. section 18.2 section 18.3
When the runway is shrinking
Imagine revenue fails to arrive as forecast and expenses remain higher than income. First find the mismatch: product, business model, forecast assumptions, or expansion that pushed burn too high. If revenue cannot fix the gap, act quickly to cut expenses. In a tech startup, that may mean layoffs; delaying until cash is gone risks closing the company and losing every job. When expenses cannot be cut enough to reach a financing milestone, bridge financing—often convertible notes that later convert into equity at a discount—may provide time. section 29.0 section 29.3 section 18.4
Runway is most valuable when it changes behavior early. It tells you whether current spending can carry the company to the next revenue or financing milestone, how large a round may need to be, and when painful action can no longer wait. Know the number before someone else has to ask for it. section 18.2 section 18.4
