Runway

Runway is the amount of time a company can keep operating before it runs out of cash. In other words, it's how long a business has left before it runs out of money, based on its monthly expenses (burn rate) and available funds. Runway is a key metric, especially for startups, as it shows how long they can grow before needing to raise more funds or become profitable.

How does runway work?

Runway is calculated by dividing available cash by the burn rate (monthly expenses). For example, if a startup has €300,000 in the bank and a burn rate of €50,000 per month, it has a runway of six months. This means it needs to reach a new funding milestone or generate more revenue before the end of this period to keep operating.

Concrete example

Imagine a startup developing an app that recently raised €500,000. With a burn rate of €100,000 per month to cover salaries, development, and operations, this startup has a runway of five months. If it hasn't generated significant revenue or raised new funds by then, it may be forced to shut down or cut costs.

Why is runway important?

Knowing your runway helps a company manage its finances more strategically. It helps founders plan when to raise additional funds or when to adjust spending to extend their cash life. A short runway can force rushed decisions, while a longer runway gives more flexibility for growth.

Need help extending your startup's runway?

If you want to optimize your runway or get financial advice to better manage your cash flow, contact us via the contact form on our website. We will help you manage your finances to ensure sustainable growth for your business.