Full Definition
Runway is the amount of time a startup can continue operating before it runs out of cash, assuming current revenue and spending levels remain constant. It's calculated by dividing the total cash available by the monthly net burn rate.
Formula: Runway (months) = Cash Balance ÷ Monthly Net Burn Rate
Runway Guidelines
- Danger zone: Less than 6 months — time to cut costs or raise urgently
- Raise preparation: 6-9 months — should be actively fundraising
- Comfortable: 12-18 months — healthy operating position
- Optimal post-raise: 18-24 months — standard target after a round
Extending Runway
Startups can extend runway by increasing revenue, reducing expenses, or raising additional capital. In downturns, extending runway becomes critical — many startups implement hiring freezes, reduce marketing spend, or renegotiate contracts.
Runway Health Zones
Real-World Example
With $2.4M in the bank and a $120K monthly burn rate, the startup has 20 months of runway.
Frequently Asked Questions
How much runway should a startup have?
How do you extend startup runway?
Related Terms
The rate at which a startup spends its cash reserves, typically measured monthly.
The net movement of cash in and out of a business over a specific period.
A short-term funding round to sustain a startup between two major financing rounds.
A funding round where a company raises capital at a lower valuation than its previous round.
Building and growing a company without external funding, using only personal savings and revenue.
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