Startup Runway & Burn Multiple
Calculate runway, burn multiple, and path to profitability. Enter values for instant results with step-by-step formulas.
Frequently Asked Questions
What is startup runway?
Runway is months until cash runs out at current burn rate. Formula: Cash balance / Monthly net burn. Example: $2M cash, $200K monthly expenses, $100K revenue. Net burn: $100K. Runway: $2M / $100K = 20 months. With growth: If revenue grows 10% monthly and expenses 3%, revenue catches expenses faster, extending runway. Healthy runway: 18-24 months post-raise. Critical: <12 months (start fundraising or cut). Runway is survival metric—when it hits zero, company dies unless funded or profitable.
What is burn rate?
Burn rate measures cash consumption speed. Gross burn: Total monthly expenses regardless of revenue. Net burn: Expenses minus revenue (actual cash decrease). Example: $200K expenses, $100K revenue. Gross burn: $200K. Net burn: $100K. Gross burn matters for: Absolute cost structure, operating leverage. Net burn matters for: Cash planning, runway calculation. Track both: Gross shows total obligations, net shows actual cash drain. As revenue grows, net burn decreases (eventually negative = cash flow positive).
What is burn multiple?
Burn multiple measures efficiency of growth spending. Formula: Net burn / Net new ARR. Example: $100K monthly net burn, $50K new MRR = $600K new ARR. Burn multiple: $100K / ($50K × 12/12) ≈ 2x. Interpretation: Spending $2 to generate $1 of new ARR. Benchmarks: <1x = Excellent (growing efficiently), 1-1.5x = Good, 1.5-2x = Acceptable, 2-3x = Concerning, >3x = Unsustainable. High burn multiple means: Growing inefficiently, CAC too high, or revenue not converting to ARR. Popular metric: David Sacks popularized for evaluating startup efficiency.
How much runway should a startup have?
Target: 18-24 months post-raise. Why: Fundraising takes 6 months (best case). If runway drops to 12 months, you're fundraising from weakness. At 6 months, desperation (bad terms). Ideal: Raise with 6+ months remaining, have 18-24 after. Reality varies: Seed: 18 months typical (smaller raises). Series A/B: 24 months (larger raises). Late stage: 24-36 months (efficiency expected). Extend runway: Cut burn (layoffs, reduce marketing) or bridge financing (convertible note from existing investors).