A startup runway is the amount of time a business can keep operating before it runs out of money.
What is good runway for a startup?
Ideally, your startup has enough cash for at least 12 to 18 months of runway. But more recent studies have shown that having 18 to 20 months of runway may be the new benchmark.
How do you use runways at startups?
This period of time isn’t just about stressing out founders with the knowledge of when they’ll run out of money. The startup runway is a pivotal time and tool for budgeting, strategizing, forecasting, and fundraising for your company’s entire lifecycle.
How to calculate startup runway
The formula for calculating your runway is fairly straightforward:
Runway = Current Cash Balance / Burn Rate
Current cash balance is the difference between your starting cash balance (the amount of money you have at the start of the time frame you’ve selected) and ending cash balance (the amount of money you have at the end of the period you’ve selected.)
Check out our “Burn Rate” page for those calculation details.
How to extend runway
Extending your company’s runway is about increasing cash flow, reducing spending, and building your cash reserves over time. To that end, here are a few strategies you can employ to help accomplish those items:
- Experiment with ways to increase sales: See if there are opportunities to upsell, cross-sell, different pricing strategies, etc.
- Examine costs and cut nonessential expenses: Overhead like rent and payroll is often a startup's largest budget item. Look into co-working spaces or implementing a hiring freeze.
- Consider corporate credit cards and other non-dilutive funding sources: Look for financial solutions that don’t require you to distribute equity to raise funds.
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