Runway is the amount of time a startup has before its cash balance reaches zero, assuming current spending and revenue patterns continue. It is calculated as:
Runway (months) = Current cash balance ÷ Monthly net burn rate
If a startup has $1.2 million in the bank and a net burn of $100K/month, it has 12 months of runway.
How much runway is enough?
The conventional wisdom — and the standard most VCs expect — is:
- At the time of raising: have at least 2–3 months of runway remaining (more is better to avoid desperation pricing)
- After closing a round: target 18–24 months of runway
- Before starting to fundraise: begin the process with at least 6–9 months of runway, since the median time to close a round in 2026 is 3–5 months
Why runway dictates strategy
Every major startup decision is constrained by runway:
- Hiring plans — each new hire reduces runway by their fully loaded cost
- Fundraising timing — starting too late puts founders in a weak negotiating position
- Growth vs. profitability — with limited runway, founders may need to throttle growth spend and focus on reaching default-alive status
- Pivot decisions — a major product pivot typically requires 12+ months of runway to execute
Extending runway without raising
Before raising a new round, founders can extend runway through:
- Revenue acceleration — even small revenue gains compound into months of additional runway
- Cost reduction — eliminating the bottom 10–20% of spend is often painless
- Venture debt — a credit line can add 3–6 months of runway without equity dilution
- Government grants and tax credits — R&D tax credits, SBIR grants, and similar programs
The "default alive" test
Paul Graham's famous question: if your revenue grows at its current rate and your expenses stay flat, do you reach profitability before running out of cash? If yes, you are default alive and have maximum leverage in fundraising. If no, you are default dead and must raise or cut.