For founders, few financial metrics are as vital - or as misunderstood - as runway. This essential indicator serves as both a compass and a clock for your startup’s financial journey. Whether you're preparing for your next funding round, strategizing your next phase of growth, or simply want to keep your company afloat. The difference between achieving growth and scaling to new heights versus facing the difficult decision to downsize or completely shut down operations often hinges precisely on how well founders monitor, interpret, and respond to these fundamental financial metrics.
What Is Runway?
Runway is the amount of time your startup can continue operating before it runs out of money, based on current cash and spending habits. Essentially, it represents the financial breathing room your company has before cash depletion becomes an imminent threat. Think of it as the number of months you have left before your cash reserves hit bottom - a critical countdown clock for your business operations. This metric gives you a clear deadline for when you need to either raise more funds, increase your revenue, or cut costs. Understanding your runway gives you the perspective needed to make timely, informed decisions about your company's financial future and operational sustainability.
How to Calculate Runway
The basic formula is:
Runway (months) = Current Cash Balance / Monthly Burn Rate
For example, if you have €200,000 in the bank and your burn rate is €20,000 per month, you have 10 months of runway.This isn't static, however. Revenue fluctuations, unexpected costs, or growth investments can either shrink or extend your runway.
To understand runway more deeply, we need to examine the concept that drives it: burn rate. Your runway is directly determined by how quickly your startup spends its available cash resources.
Burn Rate: The Engine Behind Runway
Burn rate refers to how quickly you spend cash. There are two types:
- Gross Burn Rate: Total monthly expenses (salaries, rent, software—everything).
- Net Burn Rate: Expenses minus revenue. This is what matters for runway.
Example:
- Gross burn: €80,000/month
- Revenue: €20,000/month
- Net burn: €60,000/month
Net burn reveals your true cash drain. If revenue grows faster than expenses, net burn drops—extending your runway.
Gross burn reveals your total cash outflow and shows your spending habits.
Why Averages Beat Monthly Snapshots
Monthly burn rates can swing wildly due to one-off expenses or seasonal revenue spikes. That's why it's useful to calculate a 3-month (or even 6-month) average burn rate. This smooths out anomalies and gives a more reliable picture of your cash consumption
By using a 3-month average burn rate, you can catch trends, not outliers, you prevent panic over one bad month and it aligns with investor expectations.
Why Does Runway Matter?
Investor Confidence: Investors want to see that you can manage their money and aren't at risk of running out of cash before hitting key milestones. Good runway management demonstrates fiscal responsibility and gives potential backers confidence in your business acumen.
Strategic Planning: Knowing your runway helps you time your fundraising, hiring, and product launches. With a clear understanding of your financial timeline, you can make informed decisions about when to accelerate growth initiatives and when to conserve resources.
Survival: Ultimately, runway tells you how long you have to turn your vision into a sustainable business. It provides a concrete timeframe within which you must achieve profitability or secure additional funding to continue operations.
Estimate Your Runway Now
Ready to see where you stand?
Use our free runway calculator to quickly estimate how long your cash will last.
Simply input your cash balances, revenues and expenses, and the calculator will provide you with a runway estimation.
Runway isn’t about scarcity—it’s about strategy. Knowing yours lets you balance growth and sustainability, turning anxiety into action. Monitor it religiously, embrace averages, and remember: the best founders don’t just count months—they make each month count. 😉
.png)
