Runway, Burn, and the Math That Kills Startups
More startups die from misreading their own bank account than from bad products. The math is simple , and most founders don't do it weekly.
#finance
The numbers every founder should know cold, every week
- Cash in the bank , not 'available credit,' actual cash.
- Net burn , money going out minus money coming in, per month.
- Runway , cash divided by net burn = months until zero.
- Default alive vs default dead , at current growth, will revenue cover burn before cash runs out?
Operating rules of thumb
- Always keep 18+ months of runway. Below 12 months, fundraising becomes the founder's full-time job.
- Start fundraising when you have 9, 12 months left, not 3.
- Cut early and deeply , small, polite cuts get repeated. One painful cut buys 12 months.
- Hiring is the fastest way to shorten runway. Every hire is 12+ months of fully loaded cost.
You don't run out of money on the day the bank hits zero. You run out the day no investor will fund you because you waited too long.