Burn rate + runway calculator

Burn rate + runway — how long until the money runs out

Burn rate is the speed your company spends more cash than it brings in. Runway is how many months of that burn you have left in the bank. Together they're the most important survival metrics for any pre-profit company. Misjudge them by 3 months and you're negotiating a fundraise from weakness.

Two burn rates every founder should know

Gross burn = total monthly expenses (payroll, rent, tools, hosting, marketing, everything). This is your operational spending, ignoring revenue.

Net burn = gross burn minus gross-margin revenue. If you gross $100k/mo and your gross margin is 75%, $75k covers some of your costs, so net burn = gross burn − $75k.

Runway is calculated on net burn. A company with $2M in the bank and $100k/month net burn has 20 months of runway. Same company, $200k/month net burn, has 10 months.

The 18-month rule

Classic VC advice: never let runway drop below 18 months. Reasons:

• Fundraising takes 3–6 months. You need to start with enough time to run the process.
• Markets can close overnight (2022, 2023). If you have 6 months when that happens, you're toast.
• Desperate fundraises carry terrible terms — investors smell panic.
• Giving yourself buffer lets you walk away from bad offers.

Post-ZIRP (2023+), the new comfort zone is 24+ months. Founders who raised in 2021 often discovered they'd priced rounds on growth assumptions that didn't hold, and 18 months disappeared to 6 very fast.

Paul Graham's "default alive"

From PG's 2015 essay: a startup is "default alive" if, on current revenue growth and spending plan, it reaches profitability before running out of cash. "Default dead" is the opposite — requires an external fundraise to survive.

The question to ask: if I can't raise another dollar, does my current trajectory make me survive? Most early-stage startups are default dead. Moving to default alive is a forcing function on efficiency — you stop relying on external capital.

Growth-adjusted runway

Flat runway assumes revenue stays constant. Real runway depends on growth: if MRR grows 5%/month, gross-margin revenue grows too, and net burn shrinks each month.

The calculator above does a month-by-month simulation. Starting with $2M, $80k MRR, 75% margin, $250k spend, 5% monthly growth:

• Month 1 net burn: 250k − 60k = 190k
• Month 12 net burn: 250k − (80k × 1.05^12 × 0.75) = $142k
• Month 24 net burn: ~$75k
• Month ~30: net burn = 0 (profitable)

Growth compounding stretches runway substantially — but only if growth is real and sustained. If growth decelerates, your real runway is shorter than the projection suggests.

How to cut burn

In priority order:

1. Reduce payroll: Biggest lever. Layoffs, hiring freeze, compensation cuts for leadership, replace contractors with full-timers where it saves money, spreading over time.
2. Cut discretionary marketing: Paid ads that aren't working, conferences, swag, PR retainers.
3. Negotiate vendor contracts: AWS reserved instances, annual-prepaid SaaS tools (get 10–20% off), renegotiate office leases.
4. Consolidate tools: Every startup has 100+ SaaS subscriptions. 50–70% are underutilized. Cut them or downgrade tiers.
5. Exit low-margin products: If a product line has 40% gross margin while your business runs 75%, it's burning cash. Sunset or reprice.

Rule of thumb from Mike Volpi (Index Ventures): a 30% cost reduction extends runway by ~50% if revenue stays flat. A 50% cut can stretch runway by 2x or more.

When to raise vs cut

Raise when:

• Growth is accelerating and market is open
• You have clear reasons to believe the next 12 months will show 3x+ revenue
• Your current valuation allows raising at a premium
• Burn is justified by growth outputs

Cut first when:

• Growth has decelerated or stalled
• Product-market fit is still uncertain
• The market is in a downturn
• Your fundraise would require a down round

The worst move: raising a down round while burn is high. You give up equity on bad terms and don't fix the underlying efficiency issue. Cut first, then raise from strength.