Runway
Also known as Cash Runway, Months of Runway
Runway is the number of months a startup can operate at its current net burn before cash reaches zero. Runway = cash on hand / monthly net burn. Most venture-backed companies target twelve to eighteen months of runway between rounds.
Formula
Runway (months) = Cash on Hand / Monthly Net Burn- Cash on Hand
- Total liquid cash and equivalents, excluding undrawn debt commitments
- Monthly Net Burn
- Monthly cash expenses minus monthly cash revenue
In depth
Runway answers one question: at the current rate of spending, how many months until the bank balance hits zero. The formula divides liquid cash by monthly net burn. The number governs every operational decision at a venture-backed company, from hiring plans to fundraising timing to the willingness to extend a sales cycle.
The denominator is net burn, not gross burn. A company collecting $150K per month against $400K of expenses has a $250K net burn, and that is the correct rate to divide into the cash balance. Forecasting runway off gross burn understates by ignoring the cash coming in.
Why it matters
Runway sets the calendar for fundraising. A board operating with twelve months of runway has roughly six months to close a round before negotiating from weakness, since a serious process takes three to five months and the company needs at least one month of buffer at close. Drop below six months and the round becomes a survival raise: terms compress, dilution expands, and bridge instruments appear. Operators who treat runway as a leading rather than a lagging metric build a runway model that updates monthly with actuals.
Worked example
A seed-stage company has $3.2M of cash. Last three months show:
| Month | Cash expenses | Cash revenue | Net burn |
|---|---|---|---|
| March | $220K | $30K | $190K |
| April | $240K | $45K | $195K |
| May | $260K | $55K | $205K |
Three-month trailing average net burn is $197K.
Runway = $3.2M / $197K = 16.2 months
Sixteen months gives ten months to open and close a Series A. If the May trend continues and net burn climbs to $230K by August, runway recomputes to $3.2M / $230K = 13.9 months, and the fundraising calendar pulls forward.
Frequently asked
How many months of runway should a startup have?
Most operators target twelve to eighteen months between fundraises. Right Side Capital's 2024 survey of 110 pre-seed and seed VCs reported that 53.7% advise portfolio companies to maintain six to twelve months of runway before the next raise, and only 29.6% advise more than eighteen. Less than six months forces a raise from weakness; over twenty-four months usually means the company is under-investing in growth.
Does runway include venture debt or undrawn credit?
Not in the conservative version. Pure cash runway uses only cash and equivalents in the bank. Some companies report a separate 'extended runway' figure that includes undrawn debt facilities, but investors discount it because debt covenants can pull the line in a downturn.
How does growing revenue change runway?
Linearly until cash flow turns positive, then runway is effectively infinite. A company at $250K monthly net burn with $5M cash has twenty months. If revenue grows enough to halve net burn to $125K, runway doubles to forty months without raising a dollar.
What is the difference between runway and zero-cash date?
Runway is the months remaining at a constant burn. Zero-cash date is the calendar date that runway hits zero. The zero-cash date is the more useful internal planning number because it accounts for one-off spending like trade shows, year-end bonuses, or tax payments.