Quick Summary
Runway represents how many months a company can survive with its current cash reserves at the current burn rate before needing additional funding or becoming profitable.
Runway is a critical startup metric that indicates how many months a company can continue operating before it runs out of cash, assuming current income and expense levels continue. It helps founders and investors understand the urgency of fundraising or achieving profitability.
Runway Formula
Runway (in months) = Current Cash Balance / Monthly Net Burn Rate
Example: If a company has ₹2 crore in cash and burns ₹20 lakh per month, its runway is 10 months.
Types of Runway
- Gross Runway: Based on gross burn (total expenses)
- Net Runway: Based on net burn (expenses minus revenue) - more realistic
- Zero Cash Date (ZCD): The projected date when cash balance hits zero
Ideal Runway by Stage
| Company Stage | Recommended Runway | Rationale |
|---|---|---|
| Pre-seed/Seed | 12-18 months | Time to find product-market fit |
| Series A | 18-24 months | Time to scale and reach milestones |
| Series B+ | 24-36 months | Time for expansion and profitability |
The "6-Month Rule" for Fundraising
- Start fundraising when you have 6-9 months of runway remaining
- Fundraising typically takes 3-6 months from start to money in bank
- Having less than 6 months runway weakens negotiating position
- Emergency fundraising often leads to unfavorable terms
Ways to Extend Runway
- Reduce Burn: Cut non-essential expenses
- Increase Revenue: Focus on monetization
- Bridge Round: Raise smaller emergency funding
- Convertible Notes: Quick funding without valuation
- Revenue-Based Financing: Alternative funding options
- Strategic Partnerships: Non-dilutive capital
Runway Warning Signs
- Less than 6 months of runway without active fundraising
- Increasing burn rate without proportional revenue growth
- Failed fundraising attempts
- Delayed payments to vendors or employees
- Rapidly declining cash balance
Key Points
- Months of operation before cash runs out
- Calculated as Cash / Monthly Burn
- 12-18 months recommended for startups
- Start fundraising at 6-9 months runway
- Critical metric for survival planning
- Can be extended by reducing burn or raising funds