How long can your startup survive?
Burn Rate is the rate at which a company spends its cash pool in a loss-generating scenario. Understanding your burn rate and runway is critical for survival and fundraising.
Formulas
Net Burn Rate = Monthly Expenses - Monthly Revenue
Runway (Months) = Current Cash Balance / Net Burn Rate
What is a good runway?
Investors typically like to see a runway of 18-24 months. This gives you enough time to achieve milestones, pivot if necessary, and raise the next round of funding without panic.