What Is Runway?
Runway is how many months a startup can keep operating before its cash runs out, at its current rate of spending.
How it works
Runway is a simple ratio: cash in the bank divided by net monthly burn. Net burn is cash going out minus cash coming in each month. If you have no revenue, net burn is just your monthly spending. If you do have revenue, it shrinks the burn and stretches the runway.
Runway is a projection, not a promise. It assumes spending and income stay roughly where they are today. Hiring, a slow sales quarter or a late customer payment can change the answer quickly, so founders recalculate it every month using their real bank balance.
Example
For example, a startup has $300,000 in the bank. It spends $60,000 a month and collects $10,000 a month from customers. Net burn is $50,000, so runway is $300,000 divided by $50,000, or 6 months. If it adds two hires and net burn rises to $65,000, runway drops to about 4.6 months.
Why founders care
Runway sets your deadline. Fundraising typically takes months, so many founders start raising well before the cash gets low, because a company that is almost out of money has little negotiating power. Runway also tells you how much time you have to reach the next milestone, such as a launch or a revenue target, before you need new money or a different plan.
Common mistakes
- Counting cash you expect but have not received yet.
- Ignoring one-time or annual bills, such as insurance, taxes or annual software contracts.
- Calculating runway once and never updating it.
- Forgetting that hiring and fundraising both take longer than planned.
Frequently asked questions
How much runway should a startup have?
There is no single right number, and norms vary by stage and market. Many founders aim to keep enough runway to reach their next milestone and still have several months left to raise or adjust. Talk to advisors or investors in your area for what is typical now.
What is the difference between runway and burn rate?
Burn rate is how fast you spend cash each month. Runway is how long your cash lasts at that rate. Runway equals cash on hand divided by net monthly burn, so the two always move together.
Related terms
Go deeper
- Startup Budget: How to Build One and Find Your Runway GuideCreate a startup budget step by step: costs checklist, monthly expenses, a runway formula with worked numbers, and what it really costs to start a business.
- Startup Metrics That Matter: MRR, Churn, CAC and LTV GuideStartup metrics explained in plain English: MRR, ARR, churn, CAC, LTV and more, with formulas in words, worked examples, and what investors ask for.
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General information, not legal, tax or financial advice. Reviewed 11 November 2026.