Runway

A company growing at a loss runs on a clock nobody outside it sees. When profit arrives is hard to predict; when the cash runs out can be calculated, and that date becomes the deadline behind every other decision. How long hiring can wait, when the fundraising deck gets built, how many more experiments fit — all of it hangs off one number.

For a long time founders said they would just raise the next round without counting that date. Raising takes three or four months from first meeting to money in the bank. Start meeting investors with four months of cash left and even a negotiation that goes well arrives at signing day with no money for payroll. Sitting in that seat also removes any room to argue about terms, because the other side can lower the price just by taking its time.

Runway makes the clock visible. The name comes from aviation: the distance left before takeoff, where takeoff means either turning profitable or closing the next round. Knowing the remaining distance is what decides whether the current speed is fine or something has to change. It also gives everyone in the company the same deadline, which is why the figure usually gets shared rather than kept in the finance folder.

Runway is the cash available divided by net burn. Net burn is the month's outflow minus its inflow — the amount the bank balance actually dropped.

1. Count the cash. Bank balances and deposits you can withdraw immediately, nothing else. Money that has been invoiced but not received is not cash and stays out, and neither is an investor's verbal commitment until the wire lands.
2. Average net burn over the last three months. Use a single month and a bonus payout or one annual prepayment becomes the answer.
3. Divide. A balance of $900,000 against net burn of $75,000 gives a runway of twelve months. Round down rather than up; the number is a deadline, not a score.
4. Fold in changes already committed. Five people with signed start dates next month belong in the burn figure before you divide again.

Most teams carry two versions of the number side by side. One assumes the current rate holds. The other applies the revenue plan, so burn shrinks month by month. For a company whose revenue climbs, the second runs several months longer. Treat the first as the floor if nothing changes and the second as the expectation if the plan holds. Skip saying which one you mean and the same company gets described as having sixteen months and twenty months in the same meeting.

One trap is that the ledger and the bank balance move differently. When an enterprise customer pays 45 days after invoicing, that much cash sits outside the company for those 45 days. The amount grows as revenue grows, which is how a month with a better income statement can come with a shorter runway.

There is no absolute right length. Longer than the time it takes to reach whatever comes next is enough; shorter, and the goal is out of reach no matter what it is.

What you do differs by band.

1. Eighteen months or more — the length secured right after a round closes. Several experiments can fail and there is still time to run another.
2. Twelve months — a checkpoint for the plan. Confirm that the current path produces the numbers the next round will ask for, and change direction here if it doesn't. A change made at twelve months still has time to show a result; the same change at six months only shows up as a lower burn figure.
3. Six months — the line where fundraising has to start. First meeting to wire takes three or four months, so starting later means the balance empties mid-negotiation.
4. Under three months — no position from which to argue about terms. The work turns to cutting costs, and depending on the gap, to considering a layoff.

Reach break-even and the number stops existing: net burn is zero, so there is nothing to divide by. That is why a company holding profitability across quarters doesn't track runway at all.

Length alone also isn't the whole picture. Twelve months at a company whose revenue climbs every month and twelve months at one sitting still are different situations, and the second one will find the next round much harder to close. So a measure like burn multiple, which compares money burned against growth produced, belongs next to it. Runway says how much time is left; that one says what the time is buying.

"We're at seven months of runway, so fundraising starts next month."

The line has been reached, and this is the moment to begin.

"Approving these three hires takes runway from sixteen months to thirteen."

Pricing a decision in time rather than in money.

"It's twenty months with the revenue plan, sixteen on the current rate alone."

Naming which assumption produced the number.

Pagedeck came out of its Series A with $1.15 million in the bank and net burn of $70,000, which puts runway at sixteen months. Grace refreshes the figure in the first week of every month, and anything that changes burn — a hire, a contract — has to arrive with the months it costs written next to the amount.

That table is why the office expansion was shelved last month. The added rent wasn't large, but the proposal cost two months of runway.

A long runway reads as safety. More time left sounds strictly better. But what an investor looks at in the next round is not months remaining; it is what the last twelve months of spending produced. Save your way to 24 months with flat revenue and those 24 months are not a case for investment, they are a record of growth stopping. If the raise then stalls, the remaining time gets spent standing in the same place.

The other error is treating the number as months you can spend down to zero. A result of twelve looks like twelve months of spending. In practice you have to stop earlier. Payroll, insurance and taxes go out in the final month too, and winding a company down adds severance and closing costs on top. The real deadline sits two or three months ahead of the calculated one. Without that margin, the decision only gets made after the money is gone, and by then there is nothing left to choose between.