What it means
Runway is how many months the company can keep operating before the cash runs out, assuming nothing changes. It's the simplest measure of how much time you have, and it sets the timing of your next raise.
Runway is cash divided by monthly net burn. Use the bank balance at the end of a closed month and the trailing three-month average of net burn. Dividing by gross burn gives a shorter, more cautious number. Either can be fine if you say which one you used.
It's a metric, not a GAAP figure, and a plain division assumes burn stays flat. A better version adjusts for what you already know is coming, like signed hires, an annual software prepayment or a lease that starts next quarter.
Acme has $1.2M in the bank after March closes, and trailing three-month net burn is $100,000. Runway is 12 months. If collections grow and net burn falls to $80,000, runway stretches to 15 months. If Acme instead hires four engineers at $15,000 a month each, net burn rises to $160,000 and runway drops to 7.5 months.
A raise often takes several months, so the useful question is how much runway will be left when the raise starts.
Runway is only as good as the burn rate behind it. When it gets short, a 13-week cash flow forecast shows the specific weeks where payroll lands before a customer pays.
Why it matters. It's how long you have to hit the milestones for your next raise, and a fundraise usually takes months. Say which burn and which averaging window you used.
Try it with your numbers
Change any number. The working below updates as you type.
Runway = Cash ÷ Net burnAt the end of a closed month.
Trailing three-month average.
Trailing three-month average of collections.
The day after the balance date.
Runway
12.0 months
How it’s worked out
- 1Net burn$160,000 − $60,000$100,000 / month
- 2Runway on net burn$1,200,000 ÷ $100,00012.0 months
- 3Cash reaches zeroApr 1, 2026 + 12.0 monthsApr 1, 2027
- 4Runway on gross burn$1,200,000 ÷ $160,000, if no customer paid7.5 months
| Month | Opening cash | Net burn | Closing cash |
|---|---|---|---|
| Apr 2026 | $1,200,000 | $100,000 | $1,100,000 |
| May 2026 | $1,100,000 | $100,000 | $1,000,000 |
| Jun 2026 | $1,000,000 | $100,000 | $900,000 |
| Jul 2026 | $900,000 | $100,000 | $800,000 |
| Aug 2026 | $800,000 | $100,000 | $700,000 |
| Sep 2026 | $700,000 | $100,000 | $600,000 |
| Oct 2026 | $600,000 | $100,000 | $500,000 |
| Nov 2026 | $500,000 | $100,000 | $400,000 |
| Dec 2026 | $400,000 | $100,000 | $300,000 |
| Jan 2027 | $300,000 | $100,000 | $200,000 |
| Feb 2027 | $200,000 | $100,000 | $100,000 |
| Mar 2027 | $100,000 | $100,000 | $0 |
Runway is a metric, not a GAAP figure. It assumes burn stays flat; planned hires or a large renewal change it. Say which burn you used.
Common questions
How much runway should I have when I start raising?
There's no rule, but a raise often takes several months, so founders usually start well before cash gets tight. Plan the raise from your runway, not the other way around.
Is runway a GAAP figure?
No. It's a metric built from cash and burn. It's useful precisely because it isn't on the statements, and it should state its inputs.
What does default alive mean?
Paul Graham's test: if costs stay flat and revenue keeps growing at its recent rate, do you reach profitability on the cash you have? If yes, you're default alive; if not, runway is a countdown to a raise.
Where it comes up
The glossary entries, founder guides and lessons on this site that use the term and link here.
- RunwayRunway is a cash and runway metric, calculated as Cash ÷ net monthly burn.Glossary
- Why startups should close their books every monthA monthly close turns a bank balance into numbers an investor, an auditor or a 409A firm will accept. What it is, and why it gets expensive to skip.Guide · 4 min
- Burn rate and runway: how to calculate them correctlyGross burn, net burn and months of runway, done the way an investor checks them: from cash, averaged, and with the hires you’ve already committed to.Guide · 3 min
- Cash flow statement explained: why profit isn’t cashHow the cash flow statement starts at net income, adds back non-cash costs and working capital, splits three activities and ties to the balance sheet.Guide · 5 min
- Payment terms explained: Net 30, discounts and late feesHow to choose payment terms, count a due date, price an early-payment discount, set lawful late fees and work with enterprise procurement.Guide · 6 min
- The cash flow statementNorthwind earned $2,550 and its operations consumed $3,100. The third statement is the one that explains the difference, line by line.Lesson 12
Read further
General information for US companies, not tax, legal or accounting advice. Check the specifics with a CPA before you act on them.