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Glossary

What is runway?

Runway: Runway is the number of months a company can keep operating before its cash runs out, calculated as the cash balance divided by the monthly net burn.

Also called: cash runwayUpdated

Runway is how many months a company can keep operating before it runs out of cash. It combines two numbers: the cash in the bank and the monthly net burn.

Runway in months = cash balance ÷ net burn per month

A worked example

After a seed round, a software company has €2.5m in the bank and a net burn of €125,000 a month.

Runway = €2,500,000 ÷ €125,000 = 20 months. If the money arrives on 1 November 2026, the cash lasts to the end of June 2028.

Plans change burn, so calculate runway for the plan and not only for today. Suppose the company hires and net burn rises to €160,000 from month 7:

  • Months 1 to 6: 6 × €125,000 = €750,000, which leaves €1,750,000.
  • From month 7: €1,750,000 ÷ €160,000 = 10.9 months.
  • Runway: 6 + 10.9 = about 17 months, three months less than before.

The key check is whether the runway outlasts the milestone the money is meant to buy. The ask below promises Series A readiness by Q4 2027. At €125,000 a month, 14 months of burn leave €750,000, which is six months of cash beyond that milestone. In the hiring case above, only about three months remain.

€2.5m

Seed round

The ask

€2.5m to reach €4m ARR and Series A readiness by Q4 2027

  • 55% product: ERP connectors and the audit module
  • 30% go-to-market in DACH and the Nordics
  • 15% operations and compliance (SOC 2 Type II)
Ledgerline · Seed round · 202609 / 10
The ask slide ties the amount to a milestone. The runway behind it should reach past that date. Example with invented numbers.

How to calculate and show runway

  1. Use net burn, averaged over recent months.
  2. Count only cash you can spend: the bank balance and short-term deposits, not receivables you hope to collect.
  3. Calculate runway for the plan, including planned hires and price changes.
  4. Show the date as well as the months, for example "until the end of June 2028".
  5. Mark the milestone and the fundraising window. Raising takes months, so start while the runway still covers the process. A common rule of thumb is 18 to 24 months of runway after a round.

Typical mistakes

  • Dividing by the wrong burn. Gross burn understates the runway, and net burn overstates it if revenue is about to fall.
  • Counting money that has not arrived, such as a round that has not closed.
  • Ignoring planned cost increases.
  • Quoting months without a date, which is out of date within a month.
  • Starting from the balance on a good day, just after a large customer payment.

Runway is built on the burn rate. Report both in your investor update, next to ARR.

FAQ

Frequently asked questions

How do you calculate runway?

Divide the cash balance by the monthly net burn. With €2.5m in the bank and a net burn of €125,000 a month, the runway is 20 months.

How much runway should a startup have?

A common rule of thumb is 18 to 24 months after a funding round, because the next round takes months to raise. The right amount depends on how reliable your revenue is and how quickly you could cut costs.

What is the difference between runway and burn rate?

Burn rate is how fast cash goes out per month. Runway is how long the cash lasts at that speed. Runway equals the cash balance divided by net burn.

Should runway use gross or net burn?

Net burn, because customer payments extend the time the cash lasts. If your revenue is uncertain, also show a downside case in which revenue falls, which moves the result toward gross burn.

Keep reading

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