What Is Runway? Not a Number, a Date
Runway is how many months the money in the bank will last. That sounds simple; the real point is that the number moves with every decision you make.
Runway is one division: cash in the bank, divided by monthly net burn. If you hold 600,000 and lose 50,000 a month, your runway is twelve months. That is the whole formula.
Its simplicity is misleading. The figure is not a measurement but a forecast, and the forecast rests on the assumption that todayβs burn will still be todayβs burn tomorrow. That assumption is almost never true.
What burn is and is not
Net burn is the difference between cash coming in and cash going out. It is not profit. It is not the expense line. It concerns only what leaves the account and what arrives in it.
The distinction starts to matter here: a company with revenue does not necessarily burn less than one without. A company taking in 200,000 a month and spending 260,000 burns 60,000. A company with no revenue at all spending 40,000 burns 40,000. The second has the longer runway, despite selling nothing.
Three ways to extend it, and two of them are slow
- Spend less. It works immediately and it is entirely under your control, which is why it is the first thing anyone does in a crisis.
- Earn more. The right answer, but slow: a sales push started today turns into cash two months from now, and the runway keeps shortening throughout.
- Raise money. It doubles the runway in a single move; in exchange you give away part of the company, and the process usually takes three months β starting, typically, when the runway is already short.
If you start raising when the runway runs out, you are not the one negotiating.
How it looks in the game
In the startup simulation the runway sits in the top bar and turns red below three months. That is not a warning so much as a clock: from there on, everything you do has to pay off fast enough.
Make a hire and you see this directly. The salary starts the next day; the new person reaches full output only after an onboarding period of one to two weeks, depending on the region they work from. So every hire shortens your runway first and lengthens it later β maybe. Maybe, because the revenue they bring is under no obligation to arrive before onboarding ends.
The real question
The question to ask of a runway is not "how many months are left". It is: what is the one thing I have to prove before this money is gone? Runway is not a duration, it is an exam timetable. If you do not know what you have to prove, eighteen months will not be enough either.
Burn is not a constant
The biggest error in a runway calculation is assuming today's burn will continue. It will not. It rises when the team grows, falls when a contract ends, spikes for a month and drops when a payment is pulled forward. Which is why carrying two runway figures is more useful than carrying one: what you have if nothing changes, and what you have if you make the spending you are already planning.
The gap between them is your actual room to decide. The first number describes reality, the second describes intent. Most founders watch only the first and find out later that the second lost three months some time ago.
Two kinds of company
A useful split: companies that would reach profitability at their current growth rate without raising again, and companies that would not. For the first, runway is a margin of safety. For the second, it is a countdown. Same number, two entirely different meanings.
Knowing which one you are decides most of what follows. On a countdown your only job is to change that fact β bend the revenue curve, cut the costs, or raise before it ends. With a margin of safety you can treat runway as a resource to spend, which is a completely different game.