How to calculate startup runway

Runway is cash on hand divided by monthly net burn — the months until the bank hits zero if nothing changes. The catch: the simple version misleads when revenue is growing, when expenses are growing, and when the month you measured wasn’t normal. The formula takes one line; most of this guide is about when not to trust it.

The formula

Divide what you have by what you lose each month:

runway = cash on hand ÷ monthly net burn

$500,000 in the bank at $40,000 of monthly net burn is $500,000 ÷ $40,000 = 12.5 months. Cash means money in accounts you control — not a receivable, not the venture debt you haven’t drawn. Net burn means the cash that actually left minus the cash that actually arrived. Three companies, same arithmetic:

Two rows deserve a second look. The middle one is the seed-stage company that runs through our update guides — and the runway it reports to investors is 14.2 months, not 15.8. That gap is what the rest of this guide is about. The bottom row is barely a runway number at all: below about six months, runway stops being a metric and becomes a calendar — you’re raising, cutting, or dying.

Gross or net burn?

Net. Gross burn is everything you spend in a month; net burn is spend minus what you collect. A company spending $50,000 and collecting $10,000 has $50,000 of gross burn and $40,000 of net — and net is the number runway divides by, because collected revenue is real money offsetting real spend. Burn rate: gross vs net covers both numbers and what each one is for.

The two possible mistakes point in opposite directions. Divide by gross and you understate runway: the $50,000-spend company on $500,000 of cash looks like 10 months when the honest answer is 12.5. Divide by net without checking that the revenue actually collects and you overstate it: if that $10,000 a month is invoiced but unpaid, your real position sits closer to the gross answer. Use net burn, and give it credit only for cash that lands in the bank.

Why straight division misleads

Straight division assumes next month looks exactly like this one, forever: flat revenue, flat expenses, and nothing unusual about the month you measured. Each assumption fails on its own schedule.

Compounding growth

If revenue is growing, every month’s net burn is smaller than the last, and straight division ignores all of it. Give the 12.5-month company from above some texture: $90,000 of monthly spend against $50,000 of revenue growing 5% a month, spend held flat. Projected revenue passes spend around month fourteen, and cash never dips below roughly $215,000. The honest answer isn’t 12.5 months — at that pace there is no zero-cash date at all.

This is why the runway calculator on this site doesn’t do straight division. It projects 24 months forward, compounding revenue at its growth rate and expenses at their own, and if cash does cross zero it interpolates the date inside the crossing month — which is how a runway comes out as 14.2 months instead of “about 14.” The same projection also answers a bigger question — whether revenue covers expenses before the cash runs out — which has its own name and its own guide.

Growing expenses

Growth compounds for you; expenses compound against you. A hiring plan is expense growth you’ve already committed to, and it never shows up in straight division. The seed-stage company in our worked examples holds $608,000 of cash at $38,400 of net burn — straight division says 15.8 months. The runway it actually reports is 14.2, because its projection includes the hires it has already planned, and those hires cost about a month and a half of runway before anyone’s first day. If the expense line is flat in your spreadsheet and not in your plan, the spreadsheet is wrong.

One-time items

Straight division trusts one month of data, and single months lie. The month you measured might contain a year of insurance paid up front, a legal bill, or a customer’s annual prepayment landing all at once — each bends the number in a different direction. Prefer a trailing three-month average: bank balance three months ago, minus the balance today, divided by three. The burn rate calculator computes exactly that from two bank balances — free, no signup.

The zero-cash date

A count of months rounds to a feeling; a date forces decisions. “12.5 months” sits in a spreadsheet — a zero-cash date goes on a wall, and everyone who walks past it knows what has to be true before it arrives. The conversion also surfaces arithmetic a months-number hides: a fundraise takes about six months to run properly, so your last responsible day to open a raise is the zero-cash date minus six months. Written as a date, that deadline is usually closer than the runway number made it feel.

The runway calculator reads the zero-cash date straight off the same 24-month projection — free, no signup. If you want scenarios around it — base, bear, and what happens if you cut — the runway prompt is a free Claude prompt that builds a three-scenario model you can rerun every month.

The runway number you report to investors

Three habits make a reported runway trustworthy. State it with an as-of date, because runway decays by default and a bare number goes stale the day after you compute it. Freeze the definition: if runway meant the projected zero-cash date last month, it means that this month, and any change of definition gets announced, not slipped in. And keep it consistent with the cash and burn in the same update — investors will divide the two numbers you just gave them, and if the division disagrees with your runway, the gap needs a label.

Runway: 14.2 months as of April 30 — projected zero-cash date, planned hires included. Straight cash ÷ burn says 15.8.

One line like that turns a would-be discrepancy into evidence that you know your own model. Where the number sits in the update — alongside revenue, burn, and cash in a metrics block that never changes shape — is covered in how to write an investor update.

Common mistakes

• Using gross burn. Dividing by everything you spend while ignoring what you collect understates runway — and pushes you toward cuts the numbers never asked for.
• Ignoring annual prepays. A year of insurance or tooling paid in one month makes that month look terrible and the other eleven look better than they are. Smooth annual items across the year, or let the three-month average absorb them.
• Counting committed-but-unsigned revenue. A verbal yes is not revenue, and neither is a contract in legal. Net burn gets credit for cash that arrives, nothing else.
• Measuring from an unrepresentative month. The month with three payrolls, the month of the conference, the month a big invoice landed early. One month is an anecdote; three months is a burn rate.
• Reporting runway that contradicts your own numbers. If the cash and burn in your update divide to a different runway than the one you state, investors notice — label the definition or fix the number.

Questions