---
title: "What Is Runway?"
term: "Runway"
description: "Runway is how many months a company can operate at current net cash burn before cash runs out — cash balance divided by monthly net burn."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/runway
---

# What Is Runway?

> Runway is how many months a company can operate at current net cash burn before cash runs out — cash balance divided by monthly net burn.

**Runway** is the estimated time until a company exhausts cash at its current net spending rate.

### How it works

Formula: **Runway (months) ≈ Cash & equivalents ÷ Net monthly burn**.

Net burn uses actual cash movement — payroll, vendors, debt service, minus customer collections and other inflows. Exclude non-cash accruals.

Example: $3.6M cash, $300K net burn → **12 months** runway. Hiring or marketing ramps change the denominator every month; recalculate on cash-basis monthly.

Founders often maintain **scenario runways**: base, downside (slower sales), and freeze (hiring stop). Investors watch **fully diluted runway** after planned hires in the board-approved budget.

Rule of thumb: begin serious fundraising with **9–12+ months** runway — many closes take four to six months and slips happen.

### Why it matters

- **Founders:** Runway drives every major decision — hires, office, experiments. Extend via [runway extension](/glossary/runway-extension) tactics before crisis mode.
- **Investors:** Sub-six-month runway without lead term sheet is a red flag; may require insider bridge or restructuring.

### Common mistake

Using gross burn while ignoring revenue collections, or forgetting one-time liabilities (tax payments, annual prepaids) that create cash cliffs within headline runway.

### Related ideas

See also [burn rate](/glossary/burn-rate), [runway extension](/glossary/runway-extension), [runway crisis](/glossary/runway-crisis), and [bridge round](/glossary/bridge-round).

## FAQ

### What is runway in simple terms?

Runway estimates how long your cash lasts. Divide cash in the bank by net monthly burn — money out minus money in. If you have $1.2M and burn $100K net per month, runway is about 12 months.

### Why does runway matter?

For founders, short runway forces weak negotiating leverage in financings. For investors, runway below six months without a credible plan triggers bridge terms, inside rounds, or write-downs.


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Source: https://venturecapitaltracker.com/glossary/runway