Saurabh Ahuja is the CEO of Investment Banking, GTMDialogues, helping early-stage B2B startups scale with fundraising initiatives.
Startups don’t die from a lack of ambition. They die when they run out of cash.
To possibly avoid that, as a founder need to understand two simple metrics: burn rate and runway.
Burn rate tells you how fast you’re spending money.
Runway tells you how long you have left.
Together, they act as your financial altimeter. Whether you're cruising toward growth or headed for a cash crash, these numbers provide an early warning system. Yet, many founders only glance at them during fundraising, missing the day-to-day signals that determine survival.
In this article, we’ll break down:
Let’s make sure your startup doesn’t just take off, but stays airborne.
Think of runway like fuel in a jet.
It tells you how far your startup can go before it needs to refuel, or risk crashing.
Startup runway is the number of months your company can operate at its current burn rate before running out of cash. It’s a forward-looking indicator of how much time you have to hit key milestones, raise your next round, or turn profitable.
Here's a simple way to think about it:
Runway is a crucial metric as it defines urgency.
It shapes decisions around hiring, product launches, and fundraising timelines.
Founders with 24 months of runway can think long-term and experiment. Founders with 3 months? They’re in survival mode.
Knowing your runway helps you act early, before you’re out of options.
Burn rate is how much cash your startup is spending every month to stay alive.
It’s the difference between what goes out (expenses) and what comes in (revenue). For most early-stage SaaS startups, especially pre-revenue ones, this number is usually negative, and that’s normal. What matters is tracking it and knowing what it means.
Here’s the burn rate formula:
Burn Rate = Monthly Expenses – Monthly Revenue
Let’s say your startup spends $170,000 a month and generates $24,400 in revenue.
Burn Rate = $170,000 – $24,400 = $145,600
This means you’re burning $145.6K every month to keep operations running. If your bank balance is $1 million, you’ve got about 6.8 months before the cash runs out.
Here’s how to understand gross vs net burn:
Investors typically look at net burn when assessing sustainability. It tells them how fast you’re actually drawing down your cash reserves.
Once you know your burn rate, you can calculate runway using this formula:-
Runway (in months) = Current Cash ÷ Net Monthly Burn
It’s a simple division, but the implications are huge.
Let’s say your startup has $1,000,000 in the bank and your net burn rate is $145,600/month.
Runway = $1,000,000 ÷ $145,600 ≈ 6.87 months
You now know that if nothing changes, your costs stay the same, and your revenue stays the same, you have just under 7 months to either:
Summing up, runway gives you a timeline. If fundraising takes 4-6 months (and it usually does), a 6-month runway isn’t comfortable, it’s urgent.
Checking your runway quarterly is like checking your fuel gauge once on a road trip - it’s not enough.
In early-stage startups, burn rate and runway can shift fast. One new hire, a marketing push, or a customer churn can shorten your runway by weeks. That’s why smart founders track it weekly or at least biweekly.
Here’s a simple rhythm to follow:
Quick Tip: Use a simple spreadsheet or tools like Finmark, Runway, or even a Notion doc to track cash, expenses, revenue, and runway all in one place.
You don’t need to be a CFO to stay financially alert, you just need a habit.
Your startup runway is a signal.
It tells you how aggressive, cautious, or reactive you need to be. Here’s how to interpret it at different stages:
You’re in a strong position. Use this time to:
This is your moment to play offense, with discipline.
You’re in the critical middle zone. Now is the time to:
Don’t wait until you’re at 4 months—fundraising always takes longer than you think.
You’re officially in the danger zone. Focus on:
In this zone, every week matters.
When investors look at your numbers, burn rate is a signal of how you operate.
It tells them whether you’re building with discipline or burning through capital without a clear path.
Here's what VCs are asking when they see your burn:
Founder Tip: Investors don’t expect zero burn, they expect strategic burn. If you can explain why you’re spending and what that spend is producing, your burn rate becomes a story of momentum, not waste.
There’s no one-size-fits-all number, but there is a pattern.
A healthy burn rate depends on your stage, business model, and growth strategy. The goal isn’t to burn less. The goal is to burn productively.
As a general rule of thumb:
These aren’t targets, they’re reference points. What matters more is how burn rate compares to growth.
Here are two sanity checks you can use:
A high burn is fine if it’s buying you traction.
A low burn is great unless it’s slowing you down.
When your runway’s looking short, you have two levers: cut costs or increase cash inflow.
The best founders do both, intelligently.
Here’s how to approach it:
Don’t cut product or sales muscle unless you absolutely must—cut back-office costs first.
Vendors and contractors are often open to revised terms if you’re upfront.
That $500/month tool your team barely uses? Cancel or consolidate.
Many early-stage teams can cut facilities, travel, or perks with minimal impact.
Offer a small discount for annual billing. This boosts immediate cash flow.
Introduce paid tiers, freemium limits, or service add-ons.
Chasing late payments may not feel like growth but it adds real cash back into your bank.
Improving runway doesn’t mean slamming the brakes. It means steering smarter so you can go farther.
Burn rate isn’t the enemy, it’s a signal.
Runway isn’t just math, it’s time.
Founders who treat these numbers as strategic levers give themselves room to make bold decisions without being cornered by the calendar.
Are you planning your next fundraise, prepping a new hire, or deciding if you can afford that marketing push? You should start with looking at your burn and runway.
Don’t wait for a cash crunch to start paying attention. Track early. Adjust often. Act before you’re forced to.
We are here to help. If you need help understanding where your burn rate stands or how to extend your runway, talk to us. We’ve helped SaaS teams plan, adjust, and scale with confidence.
Aim for at least 12–18 months after a funding round. That gives you time to test GTM motions, gather traction, and raise the next round without rushing.
Gross burn is your total monthly expenses. Net burn subtracts your revenue from those expenses. Investors typically focus on net burn. It tells them how quickly you’re drawing down your cash.
It can. While discipline is good, too little burn may signal that you’re under-investing in growth. Investors want capital efficiency, not capital hoarding.
Yes. Include all recurring expenses such as founder salaries, tools, rent, payroll. Your burn rate should reflect the actual cost of running the business.
Burn rate alone doesn’t set your valuation but when paired with revenue and growth, it influences investor confidence. A startup burning $300K/month with flat growth will likely get a lower valuation than one burning the same with 15% month-over-month traction.
Saurabh Ahuja is the CEO of Investment Banking, GTMDialogues, helping early-stage B2B startups scale with fundraising initiatives.