Definition
Runway is the clock every startup lives by. The simple formula assumes burn stays flat; a proper forecast models revenue growth, planned hires and the timing of big payments in and out.
Formula
RunwayRunway (months) = Cash balance ÷ Monthly net burn
Example
Demo Co has $3.9M in cash and burns $162K a month: about 24 months of runway. Try your own numbers in the runway calculator.
Benchmarks
Most investors expect 18 to 24 months after a raise. Under 12 months, fundraising or cost decisions become urgent.
Common mistakes
- Counting an annual prepay as if it repeats. See cash vs. MRR.
- Ignoring committed hires and contracts that start next quarter.
Examples use Demo Co, a fictional $3M ARR SaaS company, or a generic company where noted. Benchmarks are common reference points, not targets for every business.