How to Calculate Your Startup Burn Rate and Runway

Understanding burn rate and runway is fundamental to startup survival. Here's how to calculate and manage these critical metrics.

What Is Burn Rate?

Burn rate is how fast you're spending money, typically measured monthly.

Gross Burn Rate

Total monthly expenses, regardless of revenue.

Net Burn Rate

Monthly expenses minus monthly revenue. This is what matters most.

Formula: Monthly expenses - Monthly revenue = Net Burn

What Is Runway?

Runway is how long your cash will last at current burn rate.

Formula: Cash balance / Net burn rate = Runway in months

Example:

• Cash: $840,000
• Net burn: $70,000/month
• Runway: 12 months

Why These Metrics Matter

Investors always ask about burn and runway because it shows financial discipline and indicates when you'll need more capital.

Healthy Benchmarks

Runway by Stage

• Pre-seed: 12-18 months post-raise
• Seed: 18-24 months post-raise
• Series A: 18-24 months post-raise

Start Fundraising When

• 6+ months of runway remaining
• Allow 3-6 months for the process

How to Extend Runway

Cut Costs

• Renegotiate contracts
• Reduce non-essential spending
• Move to cheaper office/go remote

Increase Revenue

• Focus on sales
• Raise prices
• Reduce churn

Use AngelBacked to find investors for your next round. Start early while you still have runway.