How do I calculate my runway?

Runway in months equals your current cash balance divided by your net monthly burn, where net burn is cash going out minus cash coming in each month. If you have 200,000 in the bank and burn 25,000 a month net, you have eight months of runway. Recalculate it every month because burn and revenue change.

What is a healthy burn rate for a startup?

There is no universal number, it depends on stage and revenue. A useful rule is to keep enough runway to reach a meaningful milestone plus a buffer. Many investors suggest raising enough for 18 to 24 months. The deeper test is whether your growth is closing the gap to profitability faster than your cash is shrinking.

Default Alive or Default Dead: The Only Cash Question That Matters

Q: What does default alive mean?

Default alive is a term coined by Paul Graham of Y Combinator. A startup is default alive if, on its current growth rate and spending, it will become profitable before it runs out of money, without raising more. If it would run out of money first, it is default dead. Every founder should know which one they are at all times.

Q: Why do so many startups run out of cash?

CB Insights found running out of cash and failing to raise new money is one of the top reasons startups fail, cited in around 38 percent of cases. It usually happens because founders track growth and product but not the cash runway, scale spending ahead of revenue, and assume the next funding round is guaranteed. It rarely is.

There are two kinds of founders: the ones who know this number, and the ones who are about to be surprised.

Paul Graham, co-founder of Y Combinator, wrote a short essay in 2015 that every founder should tattoo somewhere visible. The question is this: if your company keeps growing at its current rate and spending at its current rate, will you reach profitability before the money runs out?

If yes, you are default alive. If no, you are default dead. Graham's uncomfortable observation was that founders often do not know which one they are, and worse, they ask the question too late, when there is no longer time to fix it. Running out of cash is one of the top startup killers, cited by CB Insights in roughly 38 percent of failures. It is also one of the most preventable, because it is just arithmetic.

You can't fix a cash problem in the month you discover it. You fix it six months earlier.

The numbers, in plain arithmetic

You only need three things, and you can find them in your bank account.

Cash balance: what is in the bank right now.
Net monthly burn: cash out minus cash in, per month. If you spend 40,000 and collect 15,000, your net burn is 25,000.
Runway: cash balance divided by net burn. 200,000 in the bank at 25,000 net burn is eight months.

Now the part that decides your fate: your growth rate. If revenue is growing fast enough that the burn shrinks each month and crosses zero before the runway ends, you are default alive. If revenue is flat or growing too slowly, the runway ends first, and you are default dead even if today's bank balance looks comfortable.

~38%fail from running out of cash

3numbers: cash, burn, growth

18–24months of runway is a common target

Default alive · do you cross before the cash runs out?

Project your two lines forward at current growth and burn. If revenue crosses costs before cash hits zero, you are default alive. If not, you are default dead and do not know it yet. Paul Graham's question, made visual.

How to get back to default alive

If the math says default dead, you have exactly two levers, and panicking is not one of them.

1. Grow revenue faster

Raise prices (Day 3), tighten your distribution channel (Day 4), improve conversion or retention. Anything that lifts net cash in. This is the better lever because it fixes the business, not just the budget.

2. Cut burn

Lower the costs that are not directly buying growth. Founders hate this because it feels like retreat, but extending runway buys you the one thing you cannot manufacture: time to find product-market fit. The companies that survive a downturn are the ones that act on burn early, while they still have options, not when the wall is two months away.

The fatal assumption

"We'll just raise more." Maybe. But funding is not a constant of nature, it dries up with markets, and investors fund momentum, not desperation. Treat the next round as uncertain and plan to reach a real milestone on the cash you already have. If the raise happens, you were prudent. If it does not, you are still alive. Hope is not a cash-flow strategy.

For intrapreneurs: you have a runway too

Inside a company, your "cash" is patience and budget cycles. Every internal venture has an implicit runway: the number of review periods before leadership expects evidence. Treat it exactly like a startup's bank balance. Know how many quarters you have, what milestone proves the thesis, and whether your current trajectory hits it in time. Internal ventures rarely die from a single bad quarter. They die from burning political capital with nothing to show, which is the corporate version of running out of cash.

The takeaway

Know whether you are default alive or default dead, and check it monthly.
Runway equals cash divided by net burn. Growth rate decides whether you cross to profit first.
Fix a cash problem early with two levers: grow revenue faster or cut burn. Both buy time.
Never assume the next round. Plan to reach a milestone on the cash you already hold.

Frequently asked questions

What does default alive mean?

A term from Paul Graham. You are default alive if, at your current growth and spending, you become profitable before running out of money without raising more. If the money runs out first, you are default dead.

How do I calculate runway?

Runway in months equals cash balance divided by net monthly burn (cash out minus cash in). 200,000 in the bank at 25,000 net burn is eight months. Recalculate every month.

What is a healthy burn rate?

It depends on stage and revenue. Keep enough runway to reach a meaningful milestone plus a buffer, often 18 to 24 months. The deeper test is whether growth is closing the gap to profit faster than cash is shrinking.

Why do so many startups run out of cash?

CB Insights cites it in around 38 percent of failures. Founders track growth and product but not runway, scale spending ahead of revenue, and assume the next round is guaranteed. It rarely is.

Cash flow is your compass.

It is one of the operating habits in Kill My Startup that separates companies that compound from ones that quietly bleed out.

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Sources

Graham, P. "Default Alive or Default Dead?" essay (2015).
CB Insights, "The Top 12 Reasons Startups Fail" (2021).
Y Combinator guidance on runway and burn management.