Business & Retail Tech

What is Runway?

Quick answer

The amount of time a startup can keep operating before running out of cash, based on its current spending.

Runway, explained

Runway is usually calculated by dividing the cash a company has in the bank by its monthly net burn rate, which is how much more it spends than it earns each month. For example, a startup with 600,000 dollars in the bank and a net burn of 50,000 dollars per month has about 12 months of runway.

Founders track runway closely because raising a new funding round often takes several months. Many advisors suggest beginning fundraising well before runway becomes critically short. Ways to extend runway include cutting costs, increasing revenue, renegotiating contracts, or securing bridge financing. Runway estimates should be updated regularly, since spending and revenue rarely stay constant as a company grows.

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