Default Alive

Describes a company that, on its current trajectory of revenue and costs, would reach profitability before running out of cash without raising more money.

Example

A company growing revenue fast enough to cover its costs within its 14 months of runway.

Important

A company that is not default alive must raise money, cut costs or grow faster to survive, and should plan for that early.

Related terms

• Cash Runway — The number of months a company can operate before running out of cash, calculated as cash divided by monthly net burn.
• Net Burn Rate — The amount by which a company's cash falls each month, equal to cash spent minus cash received.

Lessons that explain it

• Cash and runway decide whether anything else gets the chance to matter — Runway - cash divided by net burn - is the single most important monitoring figure for an early company, because running out of money ends every other possibility. Fundraising time makes the real deadline earlier than it looks. (11 min)
• A startup is a search for a business model, not a small company running one — A startup is designed to grow very fast by finding a repeatable, scalable business under deep uncertainty. That purpose is why it behaves, fails and is valued so differently from an ordinary small business. (9 min)

All 578 terms in the Investing glossary