Question 1

What is burn rate?

Accepted Answer

Burn rate is the speed at which a company spends its cash reserves. Gross burn rate is your total monthly expenses regardless of revenue. Net burn rate is your total monthly expenses minus monthly revenue, representing the actual cash you lose each month. Net burn is the more important metric because it accounts for incoming revenue.

Question 2

How much runway should a startup have?

Accepted Answer

Most investors and advisors recommend maintaining at least 12 to 18 months of runway. Having 18 to 24 months is considered a healthy position that gives you time to execute your plans and adapt. Companies with less than 6 months of runway are in a critical position and should take immediate action to extend it.

Question 3

How can I extend my startup's runway?

Accepted Answer

There are three main ways to extend runway: reduce your burn rate by cutting expenses like unused SaaS subscriptions, renegotiating contracts, or reducing headcount; increase revenue through new customers, upsells, or pricing changes; or raise additional funding through equity, debt, or grants. Replacing expensive SaaS tools with custom AI solutions can significantly reduce monthly software costs.

Question 4

What is the difference between gross and net burn rate?

Accepted Answer

Gross burn rate is your total monthly operating expenses before accounting for any revenue. Net burn rate subtracts your monthly revenue from total expenses, showing the actual cash depletion per month. For example, if you spend $50,000/month and earn $20,000/month, your gross burn is $50,000 and your net burn is $30,000. Net burn rate determines your actual runway.

Question 5

When should a startup start fundraising?

Accepted Answer

Startups should begin fundraising when they have 6 to 9 months of runway remaining. Fundraising typically takes 3 to 6 months from start to close, so beginning at 6 to 9 months gives you enough buffer. Starting too late puts you in a desperate position with less negotiating power. Starting too early may mean you have insufficient traction to demonstrate to investors.

Runway	Status	Recommended Action
> 24 months	Excellent	Focus on growth and product-market fit
18-24 months	Healthy	Comfortable position to execute plans
12-18 months	OK	Start planning your next fundraise
6-12 months	Warning	Actively fundraise or cut costs now
< 6 months	Critical	Immediate action needed: bridge funding, drastic cuts, or pivot

Burn Rate & Runway Calculator

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Runway Health Guide

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