Runway (Financial Runway)
The amount of time a company can operate before running out of cash, given its current burn rate.
Definition
Financial runway indicates how long a startup can survive with its current cash reserves before needing additional funding or reaching profitability.
How to Calculate
Runway = Cash Balance / Monthly Burn Rate
Real-World Example
Startup: $500,000 cash balance, $50,000 monthly burn rate
Runway = $500,000 / $50,000 = 10 months
Why It Matters
- Fundraising Timing: Start fundraising 6-9 months before running out
- Strategic Planning: Guides hiring and spending decisions