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Financial Metricsessential

Runway

The amount of time a company can operate before running out of cash.

Formula
Runway (months) = Cash on Hand ÷ Monthly Net Burn Rate
Example

With $500,000 in the bank and $50,000 monthly burn, you have 10 months of runway.

Good Range

12-18 months is considered healthy

Warning Range

< 6 months requires immediate action

Complete Definition

Runway refers to how long your startup can survive with its current cash reserves and burn rate. It's typically measured in months and is one of the most watched metrics by founders and investors alike.

How to Calculate Runway

Runway = Cash on Hand ÷ Monthly Net Burn Rate

Runway Benchmarks

< 6 months: Critical zone

  • Immediate action required
  • May need bridge financing
  • Consider cost cuts

6-12 months: Caution zone

  • Begin fundraising process
  • Optimize expenses
  • Accelerate revenue

12-18 months: Healthy zone

  • Standard operating range
  • Time for strategic planning
  • Flexibility for pivots

18-24+ months: Strong position

  • Can be selective with funding
  • Room for experimentation
  • Strategic hiring possible

Runway Management

1. Track weekly cash position 2. Model multiple scenarios (optimistic, realistic, pessimistic) 3. Identify levers to extend runway 4. Plan fundraising 6-9 months before running out 5. Consider "default alive" calculation

Used in:Financial ProjectionsFunding Requirements

Related Terms

Burn Rate
The rate at which a company spends its cash reserves, typically measured monthly.
Seed Funding
Early-stage funding to develop product, hire initial team, and achieve product-market fit.

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