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Burn Rate Calculator
Calculate your startup burn rate (monthly cash spend), net burn after revenue, and runway (months until cash runs out). Essential for fundraising planning, managing expenses, and making strategic decisions about growth vs sustainability.
Burn rate is the rate at which a startup spends its cash reserves. Runway is how many months of cash remain. These two metrics determine the urgency of fundraising, the viability of growth plans, and whether a startup can reach profitability before running out of money.
Formula
Gross Burn = Total Monthly Expenses | Net Burn = Gross Burn - Monthly Revenue | Runway (months) = Cash on Hand / Net Burn Rate
Understanding Burn Rate and Runway
Burn rate and runway are the most critical financial metrics for pre-revenue and early-stage startups. They determine fundraising timing, hiring decisions, and the company survival horizon. Investors closely monitor these metrics during due diligence.
Term
Definition
Notes
Gross Burn Rate
Total monthly cash outflows
All expenses regardless of revenue
Net Burn Rate
Monthly cash outflows - Revenue
Actual monthly cash consumption
Runway
Cash / Net Burn
Months until cash runs out
Default Alive
Revenue growing faster than expenses
Company reaches profitability without more funding
Default Dead
Runway ends before profitability
Requires additional funding to survive
Fundraising and Runway Rules of Thumb
Start fundraising when you have 6-9 months of runway remaining — fundraising takes 3-6 months even in good conditions. Target 18-24 months of runway with each funding round. This gives time to hit milestones for the next round without fundraising pressure. Extending runway by 3 months can significantly improve your negotiating position and valuation.
Managing Burn Rate
Reducing burn rate options: cut headcount (typically 60-70% of startup costs are salaries), renegotiate vendor contracts, move to remote work (eliminate office costs), defer non-essential spending, focus on revenue-generating activities, and consider bridge financing from existing investors. Paul Graham rule: if you cannot become profitable on current capital, either reduce burn to extend runway or raise more money — do not do both slowly.
Frequently Asked Questions
Burn rate is the rate at which a company spends its cash reserves. Gross burn rate = total monthly expenses. Net burn rate = expenses - revenue. A startup spending $200,000/month with $50,000 in revenue has a net burn of $150,000/month. With $1.8M in the bank: runway = $1,800,000 / $150,000 = 12 months.
Most investors and startup advisors recommend maintaining 18-24 months of runway at all times. Start fundraising at 9-12 months runway to leave time for the 3-6 month fundraising process. Less than 6 months runway creates extreme pressure and weakens negotiating position. After closing a round, immediately start building toward the next round milestones.
Early-stage startups typically spend 60-80% of their funding on people (salaries, benefits, recruiting). This is normal — people create the product and generate revenue. Benchmark: Series A SaaS startup: CEO $150-250k, engineers $150-200k, marketing $100-150k, sales $80-150k base + commission. Avoid over-hiring in early stages — one great engineer beats three mediocre ones.
Term coined by Paul Graham (Y Combinator): Default Alive = if revenue and expense trends continue, the company reaches profitability before running out of money. Default Dead = the company will run out of cash before reaching profitability at current trends. Every startup should know which they are. Default Dead companies must either fundraise, grow revenue dramatically, or cut expenses.
Extend runway by: cutting non-essential spending (review every vendor contract), focusing engineering on revenue-generating features, reducing hiring (contractors vs full-time), moving to cheaper infrastructure, negotiating payment terms with vendors, focusing sales on higher-value contracts, accelerating collections (shorter payment terms, upfront payments), and exploring bridge financing from existing investors.
Rule of thumb: start fundraising when you have 9-12 months of runway remaining. Fundraising takes longer than founders expect — 3-6 months from first meeting to wire is typical. Starting too late creates desperation that investors smell and exploit through lower valuations and worse terms. Starting too early wastes time on fundraising when the company should be building. Track your runway weekly.