How to Calculate Your Startup's Runway (And Why Most Founders Get It Wrong)

A founder I know raised $1.2M in pre-seed funding last year. She sat down with her co-founder, divided the bank balance by their monthly spend, and told her team they had 18 months of runway. Nine months later, she was scrambling to close a bridge round with five weeks of cash left.

Her math wasn't wrong. Her inputs were.

This happens constantly. The runway formula itself is dead simple. Getting the numbers right is where founders mess up. And the consequences are brutal because by the time you realize your runway is shorter than you thought, your options have already narrowed.

The Formula

That's it. Cash divided by how much cash you lose each month after accounting for revenue. If you have $500K in the bank and you're burning $33K net per month, you have about 15 months of runway.

But almost nobody gets the "monthly net burn rate" number right on their first try. Here are the three mistakes I see over and over.

Mistake #1: Confusing Gross Burn and Net Burn

Your burn rate comes in two flavors. Gross burn is your total monthly spending. Net burn is your total spending minus your revenue. If you spend $45K a month and bring in $12K, your gross burn is $45K and your net burn is $33K.

You want net burn for the runway calculation. Always.

Some founders accidentally use gross burn and panic because their runway looks shorter than it is. Others use gross burn on purpose because they don't trust their revenue to stick around. That second instinct is actually reasonable if you're pre-product-market fit and your revenue comes from one or two early customers who could churn. But you should still calculate both numbers and know the difference.

Mistake #2: Ignoring Lumpy Expenses

Most founders look at last month's bank statement, see how much went out, and call that their burn rate. The problem is that some months are cheap and some months are expensive.

Annual software contracts hit once a year. Tax payments come quarterly. That conference you sponsored costs $8K in one month and nothing the other eleven. If you happen to calculate your burn rate during a light month, you'll overestimate your runway. And you'll only find out when a $15K annual renewal hits and your month-over-month numbers suddenly look terrible.

The fix: take your total spend over the last three to six months and divide by the number of months. Use the average monthly burn, not the most recent month. If you're less than six months old, go through your upcoming expenses manually and add up everything you know is coming.

Mistake #3: Counting Revenue That Hasn't Closed

This one kills more startups than the other two combined.

You have three deals in your pipeline. One signed a LOI, one said "we're definitely moving forward," and one is in procurement. So you subtract all three from your burn rate when calculating runway. Then two of the three slip by four months and the third ghosts you entirely.

Only count revenue that is in your bank account or that you are contractually guaranteed to receive on a specific date. Verbal commitments, LOIs, and "we just need to get legal to sign off" are worth zero in a runway calculation. If one of those deals closes, great. Your runway just got longer. But plan for the number you have today, not the number you hope to have.

A Real Example

Let's say you have $500K in the bank. Your monthly expenses average $45K over the past four months (you used the average, not just last month). You have $12K in monthly recurring revenue from paying customers.

Fifteen months. That sounds comfortable. But notice what happens if your revenue drops to $5K because your biggest customer churns: runway drops to 12.5 months. And if you forgot about the $30K annual AWS commitment hitting next month, your real average burn is closer to $47.5K, which puts you at 11.5 months with the lower revenue.

This is why recalculating monthly matters. Runway is not a number you figure out once after fundraising and forget about.

When to Start Fundraising

The standard advice is to start raising when you have 6 to 9 months of runway left. That's because a typical fundraise takes 3 to 6 months from first meeting to money in the bank. If you wait until you have 3 months left, you're negotiating from desperation and investors can smell it.

But here's what people leave out: that 6-9 month window assumes your burn rate stays constant. If you're planning to hire two engineers next quarter, your burn is about to jump. Factor in the planned burn, not just current burn, when deciding when to start fundraising.

Some founders keep two runway numbers: one at current burn, one at planned burn assuming they execute their hiring plan. The gap between those two numbers is usually what catches people off guard.

Track It Weekly, Not Monthly

Runway should be one of the key metrics you track every week. Not because it changes dramatically week to week, but because the habit forces you to stay honest about where you stand. You notice trends earlier. A slow creep upward in expenses is invisible month to month but obvious when you see four consecutive weeks of rising burn.

If you're doing this in a spreadsheet, you'll probably update it for two weeks and then forget. That's the pattern. Kartib calculates your runway automatically from your connected financials and updates it in real time on your dashboard. No formulas to maintain, no forgetting to update the sheet after a big expense.

The One Thing to Do Today

Open your bank account right now. Write down the balance. Pull up your last three months of expenses, average them, subtract your actual recurring revenue, and divide. That number is your runway. If it's under 9 months and you're not actively fundraising, start this week.