Direct answer
How do you calculate startup runway?
Runway is the number of complete months the model can sustain a non-negative cash balance. Cash first turns negative the month after. If monthly cash flow is stable, divide available cash by monthly net burn for a quick estimate. If revenue, hiring, or large payments change, calculate ending cash month by month.
- Set a date for the opening cash balance
- Separate monthly cash inflows and outflows
- Find the first month with negative ending cash
- Compare a baseline with a funding scenario
01Define the terms
Runway, burn, cash-out date, and funding gap are different measures
- 01
Gross burn
Total cash paid during a month, including payroll, cloud services, rent, marketing, advisors, and equipment.
- 02
Net burn
Cash outflows minus cash inflows. When inflows exceed outflows, net burn may be zero or negative, so the simple division formula no longer works.
- 03
Runway and cash-out date
Runway counts complete months with non-negative cash. Cash-out date identifies the first month ending cash becomes negative. Both should come from the same monthly cash sequence.
- 04
Funding gap
The deepest cash shortfall in a defined period. It is not automatically the recommended raise because timing, milestones, buffer, and scenario risk still matter.
02Calculate monthly
A cash sequence is more reliable than a single monthly average
- 05
Confirm available cash and its date
State when the balance was measured and whether any cash is restricted. Do not combine bank balances, uncommitted funding, and freely available cash.
Common red flag: Opening cash has no date or cannot be reconciled to bank or balance-sheet data.
- 06
Schedule monthly cash inflows
Revenue recognition is not always collection. Place customer payments, deposits, grants, loans, and committed funding in the months cash is expected to arrive.
- 07
Schedule monthly cash outflows
Place payroll, bonuses, taxes, annual software, equipment, and one-time projects in their actual payment months. Large payments can disappear inside an average burn number.
- 08
Roll cash forward
Ending cash equals prior-month ending cash plus current inflows minus current outflows. The first negative ending balance marks the cash-out month.
A simplified example
A startup has NT$6,000,000 of available cash, collects NT$1,000,000 each month, and pays NT$1,600,000. Net burn is NT$600,000, producing a quick estimate of about 10 months of runway.
If hiring raises monthly outflows to NT$1,900,000 in month four, or an equipment payment arrives in month six, the actual cash-out date moves earlier. Fundraising planning should use the monthly cash curve, not only average burn.
03Work backward
Plan fundraising backward from the cash-out date
- 09
Keep uncommitted funding out of the baseline
Let the baseline show cash without new capital. Use a separate scenario for a possible raise, with an explicit amount, receipt month, and purpose.
- 10
Allow time for process and delays
Work backward for model preparation, investor outreach, diligence, negotiation, and closing. Timing varies by stage and round, so avoid relying on a universal fixed month.
- 11
Test downside timing
Compare slower collections, earlier hiring, lower margin, or higher one-time spending. The decision question is how much runway remains after assumptions change.
What Tessly can help with
Put runway back into the full financial model
Tessly calculates runway, cash-out, and funding gap from a monthly cash sequence and lets you compare how assumptions change cash. Results still depend on the cash, revenue, spending, and funding information you provide.
Tessly does not guarantee forecast accuracy, fundraising completion, or that a particular runway will support your operating plan.
FAQ
Frequently asked questions
How do you calculate startup runway?
A simple estimate divides available cash by monthly net burn. A more reliable method calculates ending cash month by month. Runway counts complete months with non-negative cash.
What is the difference between gross burn and net burn?
Gross burn is monthly cash spending. Net burn is the net decrease in cash after cash inflows.
When should a startup begin fundraising?
There is no fixed month for every startup. Work backward from cash-out date for preparation, outreach, diligence, negotiation, closing, and delay buffers.
Should an uncommitted fundraise be included in runway?
Keep a baseline without it, then compare a separate funding scenario with explicit amount, timing, and uncertainty.
Next step
Make the cash curve clear before deciding how much to raise
Before sharing the model, use the 12-question fundraising model checklist to review revenue, cost, cash, use of funds, and formula traceability.