🚀 SaaS Runway Calculator

How to Use the Runway Calculator

1. Enter Cash Balance: Your current bank balance and available cash.
2. Enter Monthly Revenue: Average monthly recurring revenue (MRR).
3. Enter Monthly Expenses: Total monthly operating costs (salaries, hosting, etc.).
4. Set Growth Rate: Expected monthly revenue growth percentage.
5. Calculate: See your burn rate, months of runway, and zero cash date.

Pro Tip: If you have less than 6 months of runway, start fundraising or cutting costs immediately.

Startup Runway and Default Alive vs Dead

Paul Graham's essay "Default Alive or Default Dead" introduced a simple but powerful framework for startup survival. The question isn't whether you're currently profitable - it's whether you'll become profitable before running out of money. This single metric determines whether you're building a sustainable business or racing against a ticking clock.

Understanding Burn Rate

Burn rate is the net cash your startup loses each month. If you're spending $100k/month and earning $30k/month, your burn rate is $70k/month. With $500k in the bank, you have roughly 7 months of runway. This is your deadline - the point at which you must either be profitable, have raised more funding, or shut down.

The Default Alive Test

To determine if you're default alive, project your revenue growth and expenses forward. If your revenue will exceed expenses before you run out of cash (assuming current growth rates), you're default alive. If not, you're default dead and need to either accelerate growth, cut costs, or raise money. Most startups are default dead, which is why fundraising is so common.

Why 12-18 Months is the Sweet Spot

Investors and advisors recommend maintaining 12-18 months of runway because fundraising takes time. A typical funding round requires 3-6 months from first pitch to money in the bank. If you wait until you have 6 months left, you're fundraising from a position of desperation, which leads to worse terms or failed rounds. Start fundraising at 9-12 months to maintain leverage.

The Growth Rate Factor

Revenue growth dramatically changes your runway calculation. A startup burning $50k/month with $500k in the bank has 10 months of runway with flat revenue. But if revenue is growing 20% monthly, you might reach break-even in 8 months - making you default alive. This is why investors obsess over growth rates: they're the difference between life and death.

When to Cut Costs vs. Raise Money

If you're default dead with strong growth, raise money - you're building something valuable that just needs more time. If you're default dead with weak growth, cut costs first to extend runway and prove you can reach profitability. Raising money on weak metrics leads to bad terms or failed rounds. Sometimes the best decision is to get lean, prove the model works, then raise from strength.

Use our calculator monthly to track your trajectory. The earlier you spot problems, the more options you have to fix them.

Frequently Asked Questions