Runway is the number of months a company can keep operating before it runs out of cash, calculated as cash on hand divided by monthly net burn. A static runway assumes burn stays flat; a realistic one models how burn and revenue will actually change month by month.
What is runway?
Burn rate is the rate at which cash is decreasing, and a16z calls net burn the true measure of the cash a company burns each month.2Source 2 · Andreessen Horowitz (a16z), 201516 Startup Metricsa16z.com Runway turns that rate into time: how long the money in the bank will last. Companies fail when they run out of cash without enough time left to raise funds or cut costs,2Source 2 · Andreessen Horowitz (a16z), 201516 Startup Metricsa16z.com which is why runway sits on the first page of most board packs.
Runway (months)=Cash on hand ÷ Average monthly net burn
- Cash on hand
- Unrestricted cash and equivalents (exclude undrawn credit lines unless labelled)
- Net burn
- Operating cash out minus cash collected, averaged over the last three months
Worked example
| Scenario | Monthly net burn | Runway on $6.0M cash |
|---|---|---|
| Static: today’s burn | $400,000 | 15 months |
| Hiring plan approved | $500,000 | 12 months |
| Hiring plan + collections growing $30k / month | Starts at $500k, falls $30k a month | Breakeven in month 18 with ~$1.6M left |
Is your startup default alive or default dead?
Paul Graham reframes runway as a yes-or-no question: assuming expenses stay constant and revenue keeps growing at the rate of the last several months, do you make it to profitability on the money you have left?1Source 1 · Paul Graham, 2015Default Alive or Default Dead?paulgraham.com If yes, you are default alive; if not, you are default dead and need to change the plan or raise. It is a sharper test than months of runway because it bakes in growth.
Common mistakes
- Dividing by gross burn, which understates runway, or by one unusually good month, which overstates it.
- Counting a term sheet as cash. Until the wire lands, show it as a separate scenario.
- Ignoring timing: annual prepayments, tax payments and bonus months make some months far heavier than the average.
- Forgetting the fundraising lead time. The date that matters is when you must start raising, not when cash hits zero.
How to track runway in Kimo
Kimo reads bank and ledger balances from QuickBooks or Xero and collections from Stripe, computes trailing net burn, and projects runway under scenarios you define. Set an alert when runway drops below your threshold, and pull the chart straight into the investor update template or a deck in Board decks.
Frequently asked questions
Should runway use gross or net burn?
How much runway should a startup have?
Does an undrawn credit line count toward runway?
Sources
2 references- Default Alive or Default Dead? (opens in a new tab)Paul Graham2015paulgraham.com
Assuming constant expenses and recent revenue growth, do you reach profitability on remaining cash?
- 16 Startup Metrics (opens in a new tab)Andreessen Horowitz (a16z)2015a16z.com
Burn rate definition; net burn as the true measure of cash burned.
External sources were accessed at the time of writing. Kimo product details, customers and figures in examples are illustrative unless a source is cited.
