Runway
How many months a company can keep operating before running out of cash.
Definition
Runway is the number of months a startup can continue operating at its current burn rate before its cash runs out. It is calculated by dividing the current cash balance by the monthly net burn rate. Companies typically start fundraising when they have 6-9 months of runway remaining, because raising a round usually takes 3-6 months.
Why it matters
If your company has short runway (under 6 months), expect either a new fundraise, cost cuts, or both. Short runway creates urgency and can lead to down rounds or unfavorable terms that dilute your equity more than expected.
Example
Your company has $4.5M in the bank and burns $300K/month net. That is 15 months of runway. The CEO will likely start fundraising around month 6-9, targeting a close before month 12.