What is Runway?
Runway is the amount of time a company can continue operating at its current spending rate before it runs out of cash. It is the clock most founders and investors watch most closely when deciding on hiring pace or the timing of a next funding round.
TL;DR
Runway is how many months a company can keep operating before it runs out of cash. It's the number that dictates hiring pace and when the next fundraise needs to close.
Formula
Runway = Current Cash Balance / Monthly Burn Rate
Why It Matters
Runway is the constraint that every other early-stage decision ultimately has to fit inside, since running out of cash ends the company regardless of how good the product or growth metrics look. It forces hiring, marketing spend, and product bets to be weighed not just on their own merit but against how many months of survival they cost, which is why founders so often discuss a new hire directly in terms of runway impact rather than just salary. Watching it closely also determines fundraising timing, since starting a raise with only a couple months of runway left puts a company in a much weaker negotiating position than starting with six months or more of cushion. A shrinking runway that isn't matched by proportional growth or a credible path to profitability is one of the clearest early warning signs investors and founders both watch for. Because it's just cash divided by burn rate, it's also one of the simplest financial metrics to calculate, which is part of why it gets checked so frequently at early-stage companies.
Example
A startup has $900,000 in the bank and a monthly burn rate of $75,000. Runway is $900,000 divided by $75,000, which equals 12 months. If that same company hires 3 new employees and its monthly burn rate rises to $95,000 with cash still at $900,000, runway drops to roughly 9.5 months, which is why hiring decisions at early-stage companies are so often discussed directly in terms of how many months of runway they cost, not just the salary itself.
Frequently Asked Questions