How to calculate startup runway: formula, example and default alive
Runway is your cash balance divided by your net burn, the cash you lose each month after customers pay you. A startup with $960,000 in the bank and an average net burn of $96,000 a month has 10 months of runway, so cash lasts to the end of January if the balance is counted on March 31. Use a three-month average of net burn and recalculate every month.
Updated · 5 min read · By the Accountable team
The short version
- Runway in months equals your cash balance divided by your average monthly net burn.
- One month's burn can swing the answer: $960,000 of cash is 8.6 months at February's burn and 11.2 months at March's, but 10 months on the 3-month average.
- Raising takes about 3 to 6 months from first contact to close, so CRV advises starting with 12 to 18 months of runway left.
- A startup is default alive if its revenue growth gets it to profit before cash runs out at its current spending, a test from Paul Graham.
- Money you raise lengthens runway but does not lower burn, so show both numbers to investors.
Runway is cash divided by net burn
Runway is the number of months until your bank balance reaches zero if nothing changes. It needs two numbers: the cash you have today and your net burn, which is cash out minus cash in from customers (see how to calculate burn rate).
Cash in the bank: $960,000.
Net burn, average of January, February and March: $96,000 a month.
Runway: $960,000 ÷ $96,000 = 10.0 months.
Count from the balance date. April is month 1, so month 10 is January and cash runs out at the end of January.
Count cash and money you can spend within days: checking, savings and money market accounts. Leave out investments you cannot sell quickly and invoices customers have not paid. For a cautious figure, subtract bills and taxes you owe and have not yet paid.
Use a three-month average, because one month can mislead
Mercury recommends a trailing three-month average to smooth one-time expenses and seasonal swings. The same company looks very different depending on which month you pick.
| Net burn used | Net burn a month | Runway |
|---|---|---|
| February only (includes a $24,000 annual insurance bill) | $112,000 | 8.6 months |
| March only | $86,000 | 11.2 months |
| Average of January, February and March | $96,000 | 10.0 months |
If your spending is seasonal, average six months instead. If you just made a big change, such as a new hire, use the new planned burn: a $12,000-a-month hire takes net burn to $108,000 and runway to 8.9 months.
Runway moves when you cut spend, hire or raise
Change one input at a time to see what each decision is worth. The base case is $960,000 of cash and $96,000 of net burn.
| Scenario | Cash | Net burn a month | Runway |
|---|---|---|---|
| Base case | $960,000 | $96,000 | 10.0 months |
| Cut $20,000 a month of software and marketing | $960,000 | $76,000 | 12.6 months |
| Hire one person at $12,000 a month | $960,000 | $108,000 | 8.9 months |
| Grow cash from customers by $10,000 a month | $960,000 | $86,000 | 11.2 months |
| Raise $500,000 and change nothing else | $1,460,000 | $96,000 | 15.2 months |
A raise adds months but leaves burn where it was, so investors look at both. A cut or new revenue lowers burn, which helps every month that follows.
Default alive: will revenue cover spending before the cash runs out?
Paul Graham's test asks whether a startup will reach profit before it runs out of money if its expenses stay constant and its revenue keeps growing at the recent rate. If yes, it is default alive. If not, it is default dead and must change course or raise money. Graham adds that founders should never count on raising as their plan.
Mercury turns the test into three steps: estimate how much your revenue grows each month, project when revenue equals expenses, and compare that date with your runway. The table runs those steps for the company above, with $46,000 of monthly cash from customers, $132,000 of monthly spend held flat and $960,000 of cash. Month 1 is April.
| Monthly revenue growth | Revenue covers spend in | Cash outcome | Verdict |
|---|---|---|---|
| 3% | Month 36 | Runs out in month 13 | Default dead |
| 5% | Month 22 | Runs out in month 16 | Default dead |
| 6% | Month 19 | Lowest balance $90,960 | Default alive |
| 8% | Month 14 | Lowest balance $311,886 | Default alive |
Growth of 6% a month is about 2x a year. The model holds spending flat, which is optimistic, so every hire makes the bar higher. Mercury also warns that assuming constant growth gives false confidence, so test a slower case too.
Start raising with at least 12 months of runway left
CRV reports that raising takes three to six months from first contact to close, and that time comes out of your runway. It advises starting with 12 to 18 months left. Mercury says a company with 9 to 12 months should begin preparing to raise, and that options narrow sharply below 6 months.
This company has 10 months, so it is already inside the window. Its choices are to cut burn, to raise now, or to show growth that puts it on the default alive side of the table above.
- Recompute runway every month from closed books, not from a forecast.
- Write down the cash-out month and put it in your investor update, so nobody is surprised.
- Model the cuts you would make before you need them, and the date you would make them.
Questions founders ask
How many months of runway should a startup have?
CRV advises pre-seed and seed companies to hold 18 to 24 months after a raise, and to start raising with 12 to 18 months left. Below 6 months, options narrow sharply.
What does default alive mean?
A startup is default alive if, with its expenses constant and revenue growing at the recent rate, it reaches profit before it runs out of cash. The term comes from Paul Graham's 2015 essay.
Should I include money I am about to raise in cash?
No. Count only money in the bank. Show the raise as a separate line, because it lengthens runway without lowering burn.
How often should I recalculate runway?
Every month, right after you close the books, using the average of the last three complete months of net burn.
What if my company is profitable?
If cash is not falling, net burn is zero or negative and runway is not limited by cash. Keep watching cash, since a large annual bill or a slow-paying customer can still cause a squeeze.
Runway that updates when the month closes
Accountable shows runway on Home and says Not limited when cash is not falling. Reports › Planning starts from your actual burn, so you can add a hire, a cost change or a raise and watch runway update before you decide.
Start freeSources, checked September 30, 2026: