Cash Runway: The Number That Kills Startups

Your bank balance tells you what you have today. Your runway tells you when the game ends.

This distinction sounds obvious. But I have watched founders with $200,000 in the bank feel safe while heading toward a cliff at 90 miles per hour. And I have seen founders with $50,000 operate with confidence because they understood exactly how long that money would last.

The difference is not the number. It is knowing what the number means.

What Runway Actually Is

Runway is simple math: cash divided by monthly burn rate. If you have $120,000 and spend $10,000 per month, you have 12 months of runway.

But simple math requires honest inputs, and this is where founders deceive themselves.

Burn rate is not just your recurring expenses. It includes the variability—that tax bill, the equipment failure, the client who pays late. Smart founders calculate burn using the worst month of the past six, not the average.

And cash is not your total balance. It is liquid cash minus any committed expenditures. If you have $100,000 in the bank but $30,000 in payables due, your real cash position is $70,000.

Why Founders Ignore It

Bank balances feel concrete. Runway forces you to confront uncertainty. It requires admitting that the current state is temporary, that the clock is always ticking.

So founders avoid the calculation. They check the bank balance, see a number that feels okay, and get back to work. The runway number—the one that would force uncomfortable decisions—stays un-calculated.

This avoidance is understandable. It is also how companies die.

The Runway Danger Zones

Different runway lengths demand different behaviors:

Under 3 months: Emergency mode. Every decision should be about extending runway or generating immediate revenue. This is not the time for experiments or investments. Survival is the only priority.

3-6 months: Danger zone. You have time to execute a plan, but not time to figure out what the plan should be. If you do not already know how you will extend runway, start now.

6-12 months: Active management required. You can make investments, but each one should have a clear path to either revenue or extended runway. Monitor weekly.

12+ months: Room to breathe. You can think strategically, take calculated risks, and invest in growth. But never stop tracking—12 months becomes 6 months faster than you expect.

The Weekly Discipline

Every founder should calculate runway weekly. Not because the number changes dramatically week to week, but because the discipline forces awareness.

When you know your runway is 8.2 months, every spending decision carries weight. That new tool subscription? That conference trip? That additional contractor? Each one either extends or shortens the clock.

This awareness is not about being cheap. It is about being intentional. The founders who survive are not necessarily the most frugal—they are the most aware.

The Compound Effect

Here is what makes runway so dangerous: the effects compound in both directions.

When runway is long, you can negotiate from strength. You take better deals, hire better people, and make better decisions. Your calmness becomes a competitive advantage.

When runway is short, desperation leaks into everything. Customers sense it. Employees sense it. Investors definitely sense it. You take worse deals because you have no choice, which shortens runway further, which increases desperation.

The best time to extend runway is when you do not need to. The worst time is when you do.