Runway is how many months a startup can keep operating at its current burn rate before it runs out of money. Calculated as: cash on hand divided by monthly net burn (expenses minus revenue).
Why it matters
Runway is the budget for being wrong. Every month you spend without learning something costs you a month of optionality at the end. The whole point of building MVPs fast and cheap is to maximize the number of "I was wrong about that" moments per dollar of runway.
A founder with 12 months of runway and a 6-month build has half their company’s life riding on a single bet. A founder with 12 months of runway and a 5-day MVP has 12 months of bets, and if one of them works, they’ll know quickly enough to double down.
Common mistakes
- Counting only big checks. SaaS subscriptions, office rent, and the half-time contractor add up faster than founders model.
- Assuming you’ll raise more before runway runs out. Investors notice when you’re close to zero. Raise from strength, not desperation.
- Spending your runway proving the idea was right. Spend it finding out whether it’s right. The first MVP exists to inform the next decision, not to validate the original one.