Metrics & Performance
Last updated
Quick Answer
The formula for determining how many months a startup can operate before running out of cash: cash balance divided by monthly burn rate.
Runway = cash on hand / monthly net burn rate. A company with $3M in cash burning $200K/month has 15 months of runway. This calculation should account for revenue growth (which reduces net burn) and planned expense increases.
In Practice
With $5M in the bank and $250K/month net burn (after $100K/month revenue), the startup had 20 months of runway. But planned hiring would increase burn to $400K/month, reducing effective runway to ~14 months.
Why It Matters
Runway determines urgency. Companies should start fundraising with 6-9 months of runway remaining to avoid desperation. Running out of runway is the most common cause of startup death.
VC Beast Take
Runway is the startup's oxygen meter. The founders who watch it obsessively survive. The ones who don't check it until month 3 of runway usually don't.
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Runway = cash on hand / monthly net burn rate. A company with $3M in cash burning $200K/month has 15 months of runway. This calculation should account for revenue growth (which reduces net burn) and planned expense increases.
Understanding Runway Calculation is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Runway Calculation falls under the metrics category in venture capital. This area covers concepts related to the quantitative measures used to evaluate fund and company performance.
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