Default dead means that at present revenue growth and expense levels, a company exhausts cash before becoming profitable — survival requires external intervention.

How it works

Compare months of runway to months until breakeven on net burn. If runway is shorter, you are default dead unless you change assumptions: faster growth, layoffs, price increases, debt, or acquisition.

Many venture-backed companies are intentionally default dead early — investing ahead of revenue — but must flip to default alive or close the next round before the clock expires.

Fundraising while default dead compresses valuation and increases structured terms: pay-to-play, senior preferences, or insider-led inside rounds with harsh resets.

Boards should flag default dead status explicitly in monthly reviews rather than hiding behind optimistic pipeline slides.

Paths out include hitting a step-change in retention, cutting burn 30–40%, or selling before liquidity crises trigger death spiral dynamics.

Why it matters

• Founders: Acknowledge the status early. Six months of runway while default dead is very different from eighteen — but both need a credible plan B.
• Investors: Reserve capital for follow-ons or accept write-offs. Default dead companies without insider support often fail quietly.

Common mistake

Assuming a white-knight term sheet will arrive because the product is “great.” Default dead math does not pause for narrative quality.

Related ideas

See also default alive, burn rate, inside round, and runway extension.