Runway
The amount of time a company can continue operating before exhausting its cash reserves, given its current burn rate.
What is Runway?
Business runway is the length of time — usually measured in months — that a company can sustain operations before running out of cash, calculated by dividing current cash and cash equivalents by the monthly net burn rate. For startups and early-stage companies that are not yet profitable, runway is one of the most closely monitored metrics because it determines the urgency and timing of the next fundraising round or path to profitability. Most investors and boards target maintaining at least 12–18 months of runway at all times, initiating fundraising when 12 months remain to allow 6–9 months for the raise itself. Extending runway can be achieved by reducing burn rate (cost-cutting, layoffs) or increasing revenue, either of which reduces the monthly cash drain.
Example
A SaaS startup has $4.2 million in the bank, $800,000 in monthly revenue, and $1.3 million in monthly expenses (gross burn). Net burn is $500,000/month. Runway = $4.2M ÷ $500K = 8.4 months. With less than 12 months remaining, the board would typically begin a Series B fundraise immediately — knowing that if the round takes 6 months to close, only 2.4 months of buffer remains when the wire arrives.
Source: Investopedia — Startup Runway