TL;DR: Runway is the number of months a company can operate before exhausting its cash reserves. It is one of the most important metrics in startup finance, and one of the primary reasons companies raise capital. More runway means more time to hit milestones, improve terms, and raise on your own timeline, not under pressure.
Cash runway is the number of months a company can continue operating before its cash reserves are exhausted. At its simplest, it is calculated by dividing current cash on hand by monthly net cash burn (the difference between cash coming in and cash going out each month).
For example: a company with $3M in the bank and $200,000 monthly net burn has 15 months of runway.
The raw number matters less than the context. Runway represents the time a founder has to reach the next significant value-creation milestone before needing to raise capital again, and how much leverage they will have when they do.
Runway can be calculated two ways:
Lenders and investors prioritise forecasted runway when evaluating a company's creditworthiness and strategic timeline, because it reflects what the management team actually plans to execute.
A venture capital process, from first meeting to signed term sheet to close, can take three to six months or longer. Founders who start raising with 12+ months of runway have the leverage to be selective, negotiate terms, and walk away from unfavourable deals. Founders raising with three to four months of runway negotiate from weakness.
Runway is not just a defensive metric. More runway means more time to execute, more data to present to investors, and more options when it is time to raise.
There are two mechanisms: reduce burn or add cash. Reducing burn means cutting costs, which can slow growth at the wrong moment. Adding cash means raising capital through equity, revenue growth, or debt.
Venture debt can extend runway without the dilution cost of an equity round, but the mechanism matters. The interest-only structure offered by some lenders (including Flow Capital) is more runway-efficient than an amortising loan, because it eliminates monthly principal repayments during the term.
The interest-only structure keeps the full $3M on the balance sheet and available for growth throughout the term. An amortizing loan returns principal to the lender each month, shrinking the capital available to the business.
A B2B SaaS company has $2.5M in the bank and $250,000 monthly net burn, 10 months of runway. They are six months from a revenue milestone or growth rate inflection that will materially improve their Series B valuation. Rather than starting a dilutive Series B process from a position of limited leverage, they take a >$2M interest-only venture debt facility. Monthly interest at 15% is approximately $25,000, well within their burn budget. Net of interest but not accounting for the contribution from revenue growth, the $2M extends their runway by approximately seven months based a very conservative assumption. They hit the milestone and raise their Series B from a stronger position, at a higher valuation.
What is a healthy amount of runway? Many founders and investors consider 18+ months or more comfortable. Twelve months is workable. Fewer than six months is urgent, at that point, the priority shifts from growth to survival.
What is the difference between runway and burn rate? Burn rate is the speed at which a company spends cash. Runway is the result: how long the current balance will last at that rate.
Should runway be calculated on gross or net burn? Net burn is the standard measure. Gross burn is useful for understanding total operating costs but overstates how quickly reserves are depleting if the company has meaningful revenue.
Does raising venture debt improve runway? It can. Venture debt adds cash to the balance sheet immediately, extending runway without the time or dilution of an equity round. The debt must be repaid, so it extends the clock without eliminating the need for future capital. The interest-only structure of some lenders minimises the monthly cash cost during the term.
When is it too late to raise venture debt? Venture debt is a growth tool, not a rescue mechanism. Companies in financial distress, with declining revenue or an inability to service interest payments, are not candidates.
Related terms: Burn Rate · Venture Debt · Growth Capital · Bridge Financing · ARR
