Runway

Understanding and managing runway is critical for startup survival. Running out of cash is the second most common reason startups fail (after lack of market need).

Calculating Runway: Runway (months) = Cash in Bank / Monthly Burn Rate

Example: $500,000 cash ÷ $50,000/month burn = 10 months runway

Types of Burn Rate: - Gross Burn: Total monthly spending - Net Burn: Monthly spending minus revenue - Burn Rate Trend: Whether burn is increasing or decreasing

Healthy Runway Guidelines: - Pre-seed/Seed: 12-18 months runway - Series A+: 18-24 months runway - Start fundraising with 6+ months remaining

Extending Runway: 1. Reduce non-essential spending 2. Renegotiate contracts and leases 3. Increase revenue (even small amounts help) 4. Consider bridge financing 5. Delay hires and major investments

Default Alive vs Default Dead: Paul Graham's framework asks: At current growth and burn, will you reach profitability before running out of money? Default alive companies can survive without additional funding.