What runway means
Runway is the number of months a company can keep going on the cash it has, if nothing changes. It turns a bank balance into a deadline, the date the money runs out, which is what you need when you plan hiring, spending or the next round.
With $600,000 in the bank, $80,000 of monthly expenses and $30,000 of monthly revenue, the net burn is $50,000 and the runway is 12 months. The formula only holds while expenses and revenue stay the same. Once either one grows, the calculator works through the plan one month at a time.
Gross burn vs. net burn
Burn rate is the speed at which a company spends its cash, and it comes in two versions:
- Gross burn is everything that goes out in a month: salaries and payroll taxes, rent, software, contractors, marketing, interest. It answers "how much does it cost to run the company?"
- Net burn is gross burn minus the cash that comes in from customers in the same month. It answers "how much does the bank balance shrink each month?" and it is the number runway is based on.
Both matter. Net burn sets the date, but gross burn shows how exposed you are: if a large customer leaves, the net burn jumps toward the gross burn. A company with $80,000 of gross burn and $30,000 of revenue has a $50,000 net burn today, but would burn $80,000 a month without that revenue, and its 12 months would shrink to 7.5.
Count cash, not accounting profit. Revenue here means money that actually arrives, and expenses means money that actually leaves, in that month. An annual contract paid up front, a yearly tax payment or a big equipment purchase changes the cash in a particular month, so if one is coming, lower the starting cash by it or rerun the numbers after it.
Runway with growth
Real companies do not stand still. Revenue grows as customers sign up, and expenses grow as the team does. The calculator applies your monthly growth rates from the second month on: with 5% revenue growth, $30,000 becomes $31,500 in month 2 and $33,075 in month 3. Each month it subtracts that month's net burn from the cash, and when the cash would drop below zero partway through a month it counts the share of that month the money still covers.
| Scenario | Revenue growth | Expense growth | Runway | Revenue covers expenses |
|---|---|---|---|---|
| Flat burn | 0% | 0% | 12 months | Never |
| Growing revenue | 5% | 0% | 18.5 months | Month 22, after the cash is gone |
| Faster growth | 10% | 0% | Does not run out | Month 12 |
| Growth while hiring | 5% | 3% | 11 months | Month 53, after the cash is gone |
All four start from the same $600,000, $80,000 of expenses and $30,000 of revenue. Growth at 5% a month adds 6.5 months, but revenue only catches up in month 22, after the money is gone. Twice the growth changes the outcome completely. Hiring that raises costs by 3% a month is worse than no growth at all: 3% of $80,000 is $2,400, more than 5% of $30,000, which is $1,500, so the net burn rises every month. Growth rates only compare fairly when you look at the amounts behind them.
Default alive or default dead
In his 2015 essay Default Alive or Default Dead?, Paul Graham asks a simple question about a startup: assuming expenses stay as they are and revenue keeps growing at its recent rate, does the company reach profitability on the money it has left? If yes, it is default alive. If not, it is default dead, and it needs new money, lower costs or faster growth.
The calculator answers the same question with your own growth rates. It shows the first month in which revenue covers expenses and whether that month comes before the cash runs out. When it does, the chart shows the low point of your cash, which is the real margin you have if growth slows down. When it does not, the gap between the two months shows how far you are from making it.
How to read and extend your runway
There are only three levers: spend less, bring in more, or add cash. The calculator makes the trade-offs concrete. Here is the same $600,000 at different net burn levels:
| Net burn per month | Runway |
|---|---|
| $20,000 | 30 months |
| $30,000 | 20 months |
| $40,000 | 15 months |
| $50,000 | 12 months |
| $75,000 | 8 months |
| $100,000 | 6 months |
- Lower expenses act right away and on every month that follows. Cutting the gross burn by $10,000 a month adds as much as gaining $10,000 of monthly revenue, without depending on customers.
- Revenue growth works slowly at first and then faster, so it matters most for long runways. Test a careful growth rate and an optimistic one to see the range.
- New money moves the date, but a round takes time to raise. Compare the date the cash runs out with how long your last raise took, and start early enough.
A new hire raises the gross burn by more than the salary. The employee cost calculator shows the full monthly cost with payroll taxes and benefits, which you can add to your expenses here. For a single product or service, the break-even calculator shows how many sales a month cover your costs.
How to use the startup runway calculator
- 1Enter the cash you have in the bank today, your total monthly expenses (gross burn) and the cash you receive from customers each month.
- 2Add monthly growth rates for revenue and expenses if you expect them to change, and pick the month the plan starts.
- 3Read your runway in months, the date the cash runs out and the month revenue first covers expenses, if it does.
- 4Check the chart and the month by month table, try the scenarios, then copy the result, a link or the table as CSV.
Frequently asked questions
How do you calculate startup runway?
Divide the cash in the bank by the net burn, which is what you spend in a month minus what comes in. With $600,000 in the bank, $80,000 of monthly expenses and $30,000 of monthly revenue, the net burn is $50,000 and the runway is 12 months. When revenue or expenses change from month to month, the calculator steps through each month instead of dividing once.
What is the difference between gross burn and net burn?
Gross burn is everything the company spends in a month: salaries, rent, software, marketing. Net burn is gross burn minus the cash that comes in from customers. Runway depends on net burn, but gross burn shows how fast the money would go if revenue stopped.
What does default alive mean?
Paul Graham used the term in a 2015 essay. A company is default alive if, with its current expenses and revenue growth, it reaches profitability on the money it already has. Otherwise it is default dead and needs new money or a change of plan. The calculator shows the month revenue first covers expenses and whether that comes before the cash runs out.
How does revenue growth change my runway?
Every month of growth lowers the net burn a little, so the cash lasts longer than the simple division suggests. With the default numbers, 5% revenue growth a month stretches 12 months of runway to about 18.5 months, and 10% a month makes the company profitable before the money runs out.
Should I count money from a funding round that has not closed?
Base the main plan on the cash you actually have. If a round is likely, run the numbers twice: once with today’s cash and once with the new money added, and compare the dates. Plans that only work with the second number depend on that round closing.
Why is my runway shorter than cash divided by burn?
Because your expenses grow. New hires, higher rent or bigger ad budgets raise the burn every month, so later months cost more than today. Enter an expense growth rate, or rerun the calculator with the higher expenses you plan for, to see the real date.
Is my data sent anywhere?
No. The calculation runs in your browser. Your numbers are not stored or sent to a server, and they only appear in a link if you copy one.