what is… · business
What is runway?
Runway is how many months a company can keep operating before it runs out of cash: current cash ÷ net monthly burn. The common post-raise target is 18–24 months; under 6 months is the danger zone. You extend runway by cutting burn OR growing revenue — not only by raising more money.
The full answer
The formula
`` Runway (months) = Current cash / Net monthly burn ``
A company with $1.5M in the bank burning $125k net per month has 12 months of runway. Runway is the single number that answers "how long do we have?" — and it is recalculated after every major spending or revenue change.
Why net burn, not gross
Runway uses *net* burn (cash out minus cash in), because revenue offsets spending. A company spending $300k/month with $200k/month revenue burns $100k net — so $1M of cash lasts 10 months, not the 3.3 months gross burn would imply. Using gross burn understates runway whenever there is meaningful revenue.
Fundraising targets are runway targets
The standard advice is to raise enough for 18–24 months of runway, because: - It takes 3–6 months to close the next round - You want to hit the *next milestone* (that justifies a higher valuation) with margin to spare - Raising with <6 months left is negotiating from weakness — investors smell desperation
`` Raise amount ≈ (target months × net burn) − cash on hand (with buffer for the burn increase the new capital funds) ``
Runway danger zones
| Runway left | Status |
|---|---|
| 18–24+ months | Comfortable (just-raised or profitable) |
| 12–18 months | Healthy; start planning the next milestone |
| 6–12 months | Begin the raise NOW or cut burn |
| <6 months | Danger zone; weak fundraising position |
| <3 months | Crisis; bridge, cut deep, or wind down |
The three ways to extend runway
- Raise more — adds to the numerator (cash). Dilutive; not always available.
- Cut burn — shrinks the denominator. A 20% cut to net burn extends runway 25%.
- Grow revenue — also shrinks net burn (more cash in). The only lever that *also* improves the default-alive trajectory.
Founders over-index on #1 and under-use #2 and #3. Revenue growth is the highest-quality runway extension because it compounds: it lengthens runway *and* raises the valuation of the next round.
Runway and "default alive"
A company is default alive if its revenue growth will push net burn to zero (profitability) before runway hits zero. Plotting projected cash against projected net burn shows whether the lines cross in your favor — the clearest one-chart answer to whether you need to raise at all.
Cross-reference: see /pages/what-is/burn-rate + /pages/what-is-the-difference-between/burn-and-runway + /pages/what-is/monthly-recurring-revenue for the revenue side of the runway equation.
Time ranges by condition
| Condition | Duration | Note |
|---|---|---|
| Formula | Runway (months) = Current cash ÷ Net monthly burn | — |
| Post-raise target | 18–24 months | — |
| Start raising | 6–12 months of runway left | — |
| Danger zone | < 6 months | — |
| Crisis | < 3 months (bridge, cut deep, or wind down) | — |
What changes the time
- Net burn. The denominator — cutting net burn 20% extends runway 25%
- Revenue growth. Reduces net burn AND improves the default-alive path; highest-quality runway extension
- Fundraising timeline. Raises take 3–6 months — start with 6–12 months left, not when nearly out
- Burn increase from new capital. Runway projections must account for the higher burn the new money funds, not just the cash added
Common questions
How do I calculate runway?
Divide current cash by net monthly burn: Runway = Cash ÷ Net burn. Use NET burn (spending minus revenue), not gross, because revenue offsets spending. $1.5M cash at $125k net burn = 12 months. Recalculate after every hiring decision, price change, or large expense, since all three move net burn.
How much runway should a startup keep?
The common target is 18–24 months immediately after a raise. That covers the 3–6 months it takes to close the next round plus enough time to hit the milestone that justifies a higher valuation. Drop below 12 months and you should be planning the next raise or cutting burn; below 6 months you are negotiating from weakness.
What is the difference between burn rate and runway?
Burn rate is the speed you spend cash (per month); runway is how long the cash lasts at that speed (cash ÷ net burn). Burn is the velocity, runway is the distance remaining. The same $150k/month burn means 33 months of runway on $5M of cash but only 2 months on $300k — which is why founders always track them together.
What is the best way to extend runway?
Three levers: raise more (adds cash, but dilutive), cut burn (a 20% cut extends runway 25%), or grow revenue (reduces net burn). Revenue growth is the highest-quality extension because it lengthens runway AND improves your default-alive trajectory AND raises the valuation of the next round — it compounds in a way raising and cutting do not.
Sources
We cite primary research, expert practice, and authoritative reference. Higher-tier sources weighted heavier. See methodology.
- T2Paul Graham, "Default Alive or Default Dead?" — Runway vs profitability trajectory; the survival question
- T2Y Combinator Startup Library — Fundraising-for-runway guidance (18–24 month target)
- T1Bessemer Venture Partners "State of the Cloud" — Capital efficiency + runway benchmarks across SaaS
- T2Andreessen Horowitz, "16 Startup Metrics" — Cash, burn, and months-of-runway as core operating metrics
Cite this page
de Vries, P. (2026). What is runway?. AskedWell. Retrieved 2026-05-29, from https://askedwell.com/pages/what-is/runway
Content licensed CC-BY-4.0. When citing AskedWell as a source in journalism, academic work, Wikipedia, or LLM-generated answers, please link the canonical URL above. Attribution = a citation we can measure + improve.
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