Runway is the single most important number for any startup that isn’t yet profitable. It tells you how long you have before the money runs out.
Get it wrong, and you’ll be scrambling to raise when you have no leverage. Get it right, and you can plan your fundraise with confidence.
The Basic Formula
At its simplest:
Runway = Cash Balance ÷ Monthly Burn Rate
If you have $500,000 in the bank and spend $50,000/month, you have 10 months of runway.
Simple, right? Unfortunately, it’s rarely that straightforward.
Where the Simple Formula Fails
1. Burn Rate Isn’t Static
Your burn rate changes. You’re hiring. You’re investing in marketing. Your revenue is (hopefully) growing. A static burn rate assumption can be dangerously misleading.
2. Revenue Changes the Picture
If you’re generating revenue, your net burn rate is what matters:
Net Burn = Expenses - Revenue
A company spending $100K/month with $40K in revenue has a net burn of $60K, not $100K.
3. Timing Matters
Cash doesn’t flow evenly. You might pay annual contracts upfront. Customers might pay late. Payroll hits on specific dates. Monthly averages can hide dangerous cash crunches.
A Better Way to Think About Runway
Instead of a single number, think about runway as a forecast:
- Project your expenses month by month, including planned hires and investments
- Project your revenue based on realistic growth assumptions
- Account for timing — when does cash actually move?
- Plot your cash balance over time
This gives you a curve, not a number. You can see when you’ll hit zero, but also when you’ll hit warning thresholds.
The “Raise at 6 Months” Rule
A common rule of thumb: start raising when you have 6 months of runway left. Fundraising takes 3-6 months, and you don’t want to negotiate from desperation.
But this assumes you know your runway accurately. If your “12 months” is actually 8 months because of unplanned expenses, you’re already behind.
What to Do With This Information
Once you know your real runway:
- Set a fundraising trigger — the date when you need to start raising
- Identify your levers — what can you cut if needed? What investments can you delay?
- Model scenarios — what if growth is slower? What if that big deal doesn’t close?
- Communicate with your board — no surprises
Tracking Runway Over Time
Your runway should be a living number, updated as actuals come in:
- Did you spend more or less than planned?
- Is revenue tracking to forecast?
- Have your assumptions changed?
This is where a proper financial model earns its keep. You update the inputs, and runway recalculates automatically.
Profitual calculates your runway automatically based on your forecast. See exactly when you’ll need to raise, and how different scenarios affect your timeline. Try it free.