Burn rate & runway,
how long does your cash last?

Burn rate guide

What burn rate actually tells you about your startup.

Burn rate is the speed at which a company consumes its cash reserves. For most startups, it is the single most important operational metric — it determines how long you can survive without new revenue or new funding. Investors, founders, and CFOs all track it monthly.

Gross burn vs. net burn

Gross burn is simply your total monthly operating expenses — payroll, rent, software, marketing, and everything else you spend. It tells you the baseline cost of keeping the lights on.

Net burn is gross burn minus monthly revenue. If you spend $60,000/month and earn $20,000/month, your net burn is $40,000 — that is the actual cash leaving your bank each month. Net burn is what determines your runway.

Cash runway

Runway = cash balance ÷ net burn. At $500,000 in the bank and $40,000/month net burn, you have 12.5 months of runway. Investors typically want to see at least 18 months of runway after a funding round — enough time to hit meaningful milestones and raise the next round without pressure.

A common mistake is calculating runway with gross burn instead of net burn. If you have meaningful revenue, this understates your real position. Conversely, early-stage companies with no revenue should treat gross and net burn as identical.

What is “default-alive”?

A startup is “default-alive” if it will reach profitability on its current trajectory without raising more money. Paul Graham popularized this framing. If your monthly revenue exceeds monthly expenses, your net burn is negative — you are building cash, not spending it. This fundamentally changes your negotiating position with investors and your strategic options.

If your revenue does not cover expenses, you are “default dead” — survival depends on either growing revenue, cutting costs, or raising capital before cash runs out.

The 18-month rule

Fundraising takes longer than founders expect. A typical Series A process runs 3–6 months from first outreach to wire. Add the time needed to get your metrics to investment-grade shape before you start. If your runway drops below 12 months, you are in a weak negotiating position; below 6 months is crisis territory. Most investors advise starting the next raise when you have 12–15 months left — not 6.

Using the reverse calculator

The reverse calculator answers the question: “If I want my runway to last 18 months, what is the most I can spend each month?” This is useful for budgeting before a hire, before a new marketing spend, or when negotiating your next lease. Set your target runway with the slider, and the calculator shows you both the maximum net burn and the implied expense cut if you are currently over budget.

How to extend runway without raising

The levers are simple: cut costs, grow revenue, or both. The most common cost-cutting priorities are payroll (usually 60–75% of burn for software companies), then office space, then software and vendor contracts. On the revenue side, annual prepay discounts and upsell campaigns can add meaningful ARR without new customers. Even a 15% reduction in gross burn can add 2–3 months of runway.

Disclaimer

This calculator uses constant monthly inputs and does not model revenue growth, seasonal variation, payroll tax timing, or one-time expenses. Real-world runway depends on many factors not captured here. This tool is for planning and discussion purposes only and does not constitute financial or legal advice. Consult a CFO, accountant, or financial advisor for decisions affecting your company.