Runway basics and practical guidance
Runway is the number of months a business can operate before running out of cash at the current burn rate. How much you need depends on stage and risk tolerance.
Common guidance:
- Pre-seed: 12–18 months to reach a significant milestone
- Seed: 12–24 months to reach product-market fit or meaningful traction
- Series A and beyond: 12–24 months tied to scaling plans
How to calculate:
- Runway (months) = Current cash balance / Monthly net burn
- Net burn = Monthly cash outflows minus monthly cash inflows
Planning considerations
- Build a buffer for unexpected delays—aim for 12 months minimum if you can.
- Plan fundraising with enough lead time (6–9 months) before runway ends.
- Use scenario planning: what happens if growth stalls or CAC increases?
Trade-offs
Longer runway reduces fundraising stress but may slow growth if you’re too conservative with spend. Shorter runway increases urgency to hit milestones but adds financing risk. Align runway with realistic milestones you can achieve to warrant additional investment.