Runway is the length of time a business can keep operating before it runs out of cash, calculated as current cash divided by its monthly net burn rate.
Runway answers a founder's most pressing question: how long until the money runs out. It equals cash on hand ÷ monthly net burn, expressed in months. A startup with $600,000 in the bank burning $50,000 a month has twelve months of runway.
Runway drives strategic urgency: it sets the deadline to reach profitability, cut costs, or raise the next round of financing. Lenders and investors watch it closely, and prudent management means acting on fundraising or cost decisions well before runway runs short, not after.
A company holds $400,000 and burns $40,000 net per month, giving ten months of runway. To stay safe it begins raising its next round about six months out, before the runway becomes critically short.
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