The number that decides whether your company survives. If you learn one thing from this whole Academy, learn this.
Gross burn is everything going out of the bank each month.
Net burn is gross burn minus the money coming in. It is the rate at which your balance actually falls.
Runway is cash in the bank ÷ net burn — how many months until zero.
When an investor asks about burn they almost always mean net.
Because runway is the constraint behind every other decision. Can you hire? Depends on runway. Should you raise? Depends on runway. Can you afford a nine-month sales cycle? Depends on runway.
And because running out of money is how companies die — not from bad products, but from bad products plus no time left to fix them. Runway is the time you have to be wrong in.
Cash: $50,000. Monthly costs: $8,000. Monthly revenue: $3,000.
Gross burn = $8,000. Net burn = $8,000 − $3,000 = $5,000.
Runway = $50,000 ÷ $5,000 = 10 months.
Now they hire an engineer at $6,000/month:
Net burn = $11,000. Runway = $50,000 ÷ $11,000 = 4.5 months.
One hire cut the runway by more than half. That is not an argument against hiring — it is an argument for making the decision with the number visible rather than in your head.
First-time founders often quote runway from a spreadsheet made three months ago. Runway moves every single month, and it moves fastest when things are going well and you are spending more.
The second mistake is forgetting one-off costs — annual insurance, a tax bill, a contractor's final invoice. They do not show in a typical month and they absolutely come out of the bank.
The third: starting to raise with three months left. Fundraising takes three to six months. Three months of runway means negotiating from desperation, and everyone in the room can tell.
Every account, today. Not including money you have been promised but not received.
Salaries, contractors, hosting, tools, rent, insurance, accounting, everything. Then add one twelfth of each annual bill so nothing ambushes you.
Recurring revenue you can count on. Not a deal you hope will close.
Cash ÷ net burn = months. Write the date you hit zero on a calendar, not just the number of months.
Before any hire, tool or contract, ask what it does to this number. A hire is not a $6,000 decision; it is a runway decision.
Every month without exception, and before every spending commitment. Start raising when you have 9–12 months left, never 3.
If net burn is zero or negative you are default alive, and runway is effectively infinite. Then the relevant question changes to growth rate — but check quarterly that it is still true.
Apply this to your own startup in My Full Journey (free account).