Runway refers to the number of months your business can operate before running out of cash.
It’s especially important for venture-backed companies, offering a quick view of how long your current cash balance will last.
You might hear terms like company cash, team cash, or founder cash—but finance leaders and CFOs usually focus on total runway at the company level. It’s a critical metric for planning fundraising, managing burn, and making strategic decisions that support sustainable growth.
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How do you calculate cash runway?
There are two common ways to calculate runway:
- Total cash divided by average monthly net burn: useful for a stable burn rate
- Total cash divided by projected future monthly burn: better for companies expecting big changes, like new investments, headcount growth, or major one-time expenses
The second method gives a more realistic view if your cost structure is evolving, helping you plan with greater confidence.
Cash runway formula
The typical cash runway formula is the first option — your total amount of cash divided by average monthly cash burn rate.
As an example, consider a company that recently raised a Series A and has $20 million in the bank. Over the last three months, their net burn has been $700k, $750k, and $800k, respectively. That gives the company a three-month net burn trend of $750k.
Given those numbers, the runway calculation would be:
- $20 million in cash reserves / $750k average net burn = ~26 months of runway
4 reasons why cash runway is important
In recent years, an early-stage startup could get by with a cash runway rate of 15-18 months after their first fundraise. But in the context of a market downturn, investors view best-in-class companies as those with closer to 25+ months of runway.
As you try to maintain that benchmark, keep these four reasons why cash runway visibility is crucial for business success in mind.
It shows how long you have before needing another round of funding.
Runway helps you gauge how much time you have to reach key milestones before raising your next round. Cash is the foundation of your business—and runway tells you how much time is left on the clock. With this insight, you can plan with intention and avoid rushed fundraising.
It can highlight inefficiencies in your business.
Tracking runway regularly helps you spot issues before they snowball. If your net burn rate is accelerating, it may be time to take a closer look at spend patterns. Visibility into where your cash is going makes it easier to course-correct early—and protect your long-term trajectory.
It instills confidence in your investors.
Runway is a simple, powerful metric that gives investors a quick read on business health. A longer runway shows you have time to iterate, problem-solve, and grow at a sustainable pace. And in a market where growth isn’t always linear, that kind of resilience goes a long way.
It can show you that you have room for bigger investments.
Startups need to burn cash to grow—but efficient growth is key. If your runway stretches 30 or 40 months, you’re above the best-in-class range. That could be a sign you’re in a strong position to strategically invest in areas like hiring, product development, or customer acquisition.
Just make sure you’re striking the right balance: burn with purpose, and always link investments to measurable growth.
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The challenges of calculating cash runway
Businesses evolve constantly—and so does spending. Where your budget went last month might look very different from where it’s going today. Maybe you’re ramping up marketing to reach new buyers, hiring engineers to accelerate product development, or opening a new office. Or maybe someone accidentally crashes the company drone into a billboard… again.
Despite all this movement, many companies still base runway calculations on static, historical data. The problem? These snapshots often don’t reflect real-time spending or future plans. And when projections are off, you risk making big decisions with outdated assumptions.
For example, you might calculate that you have 18 months of runway based on last month’s spend. But if expenses increase and you don’t adjust your forecast, you could be left with only nine months of runway—and find out too late. Misreading your cash position can be a critical, and sometimes fatal, mistake.
On top of that, cash outflows rarely match how they appear in your accounting records. You might pay upfront for a full year of software, but your P&L spreads the cost over 12 months. Or maybe you accrue bonuses throughout the year, but the actual payment happens all at once. The data lives in your systems—but it’s scattered across accounts, departments, and platforms.
This makes it difficult to get a complete, accurate view of how cash is moving through your business. Transactions might be spread across bank accounts, credit cards, and billing tools—making visibility a challenge.
And that’s just the expense side. On the revenue side, runway also depends on how much cash is actually coming in. It’s not just about bookings—it’s about collections. How quickly are customers paying their invoices? How much remains outstanding? For new business, how long does it take to turn pipeline into real revenue?
All of this impacts your true runway. To plan with confidence, you need real-time visibility into both spending and cash inflows—so you can see what’s changing, adapt early, and protect your growth.
Key takeaways
- Cash runway is a critical metric that indicates how long a company can sustain operations before needing additional funding, measured in months
- Calculating cash runway involves dividing total cash by the average monthly net burn, offering insights into financial health and planning
- Understanding cash runway helps identify inefficiencies within the business, boosting investor confidence and guiding strategic growth decisions
- Regularly updating cash runway calculations is essential, especially for startups and growth-stage companies, to accommodate changes in spending and revenue
How to track cash runway more efficiently
Let’s be clear: tracking your business’s cash runway starts with understanding historical spend and collections. But it doesn’t end there. Accurate runway visibility also requires forecasting—factoring in future expenses, revenue timing, and evolving business plans.
To do this well, you need both a clear view of what’s happened and a thoughtful projection of what’s coming next—whether that’s in a month, a quarter, or a year.
Historically, this level of planning required complex Excel models—often several versions to account for different scenarios. These spreadsheets can be time-consuming to build and maintain, and their insights are usually locked inside the heads of the finance team. That leaves the rest of the business relying on static models without the full context behind the numbers.
Fortunately, today’s strategic finance tools can help. By integrating with your financial systems—such as your ERP, CRM, and payroll platform—these tools can automatically aggregate and categorize cash inflows and outflows. This enables real-time runway tracking and dynamic, scenario-based planning that adjusts as your business changes.
Instead of relying on rough historical averages, modern tools allow finance teams to model what-if scenarios, forecast the impact of hiring or pricing changes, and monitor how growth investments affect cash position over time.
In fast-moving environments, your runway is constantly shifting. Staying ahead of those changes requires not just tracking spend—but anticipating what’s next.
Cash runway FAQs
Why might a company need additional capital, even with a reasonable cash runway?
Even with a decent cash runway, a company might need additional capital to fund growth initiatives, such as product development, market expansion, or hiring. Also, unexpected expenses or market downturns may necessitate additional funding.
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How does gross burn rate impact cash runway?
Gross burn rate is when a company spends its capital as overhead before it becomes profitable. This directly impacts the cash runway, as a higher gross burn rate will reduce the runway faster, leading to the need for additional funding sooner.
How often should a company calculate its cash runway?
Cash runway should ideally be calculated and reviewed regularly, at least monthly. This is because a company’s financial situation can change rapidly, especially for early-stage startups and growth-stage companies, and it’s important to have the most current understanding of your cash position.
