Runway is a countdown, not a number

Every other metric in your deck is a story about how this one is going to end.

Cash

$48,000

Net burn

$16,000/mo

Runway

3.0 mo

Time to raise

4.5 mo

The definition founders get wrong

Runway is cash divided by net burn — money out minus money in — and the word “net” is where most of the self-deception lives. A founder with $48,000 in the bank, $22,000 of monthly costs and $6,000 of monthly revenue is not burning $22,000. They are burning $16,000, and they have three months.

The trap is that revenue is the volatile half. Costs are contracts: salaries, rent, cloud, tools. They arrive whether or not the quarter went well. Revenue is a hope with a churn rate attached to it. When you compute runway off an optimistic revenue line, you are not measuring your runway — you are measuring the runway of a company you would like to be running.

So compute it twice. Once with revenue as it is today. Once with revenue at zero. The first number is your plan; the second is your floor. The floor is the one that decides whether you can still say no to a bad term sheet.

Three levers, and not one of them is fast

There are exactly three ways to add runway, and founders reach for them in the wrong order because they rank them by how much they hurt instead of by how long they take.

• Cut burn — the only lever that moves this month. Software, contractors and ad spend can go this week. But the deep cut is people, and that one takes notice periods, severance and a morale hit that outlives the saving.
• Raise revenue — one to three months before it shows in the bank, because someone has to want it, sign for it and then actually pay. Price changes land faster than new customers; existing customers land faster than new segments.
• Raise money — three to five months from first conversation to money in the account, and that assumes the round happens. Every week you spend “getting the deck right” before you start is a week of runway spent.

Add up the lead times and you get the working rule: you pull the lever roughly one lead time before you need the result. A round that lands in four months has to start when you still have five or six. Founders who start at three months are not raising a round; they are negotiating from a chair with no legs, and every investor in the room can see it.

The six-week wall

Below roughly six weeks, your options collapse in a fixed order — and it is always the same order.

1. You lose the ability to hire, because you cannot honestly promise anyone a job in ninety days.
2. You lose the ability to negotiate, because every term sheet is now compared against dying rather than against a better term sheet.
3. You lose the ability to choose, because the only investor left is the one who moves fastest, and speed and quality are not the same thing.

Which is why the number worth writing down is not the runway you have. It is the runway at which you will act. Pick it while things are calm — five months, four, whatever fits your raise — and write it somewhere you will see it. A trigger set in advance survives the panic; a judgement call made at six weeks does not.

Check it weekly

Most founders look at runway once a month, when the bookkeeping closes. That means a bad month is discovered four weeks after it began, and by then you have spent a month of the very thing you were measuring.

Weekly is enough. It takes five minutes: bank balance, this month’s committed costs, this month’s collected revenue. You are not doing accounting. You are checking whether the countdown moved faster than a week.

Victor · mentor

“You have six weeks of cash. Cut burn, raise, or change the plan — in that order. Doing all three at once is how you end up doing none of them.”