What Is Burn Rate?
Burn rate is the rate at which a startup spends its cash reserves — typically measured monthly. Gross burn rate is total monthly cash outflows (salaries, rent, software, marketing). Net burn rate is gross burn minus monthly revenue — it represents the actual cash consumed after offsetting revenue. For pre-revenue startups, gross and net burn are identical. For revenue-generating startups, net burn is the more meaningful figure for runway calculation.
Calculating Runway
Runway is how many months of cash your startup has remaining at the current burn rate: Runway = Current Cash Balance / Monthly Net Burn Rate. If you have $500,000 in the bank and burn $25,000 per month net, your runway is 20 months. Runway is arguably the most important metric a startup founder can know — it determines how long you have to reach the next milestone before running out of money.
Why Investors Care About Runway
Investors want to see that your runway is sufficient to reach meaningful milestones before the next fundraise. Raising when you have 3 months of runway left puts you in an extremely weak negotiating position — investors know you are desperate and will either pass or offer unfavorable terms. The ideal time to raise is when you have 12-18 months of runway remaining and strong growth metrics. This gives you negotiating leverage and time to run a proper fundraising process.
How to Use Our Free Burn Rate Calculator
Our free burn rate calculator at cookiescursor.com calculates gross burn, net burn, runway in months, runway date, and break-even monthly revenue. Enter starting cash, ending cash, time period, and optional monthly revenue. Currency selector supports 40+ currencies. No signup required.
Frequently Asked Questions
What is a safe burn rate for a seed-stage startup?
This depends entirely on your runway and growth rate. A startup burning $50k/month with 24 months runway and strong growth is in a better position than one burning $20k/month with 6 months runway.
How do I extend my runway?
Reduce costs (team size, office, software), increase revenue (faster sales, pricing optimization), raise additional capital, or pursue revenue-based financing or grants.
What is default alive vs default dead?
Paul Graham's framework: if a startup's current growth rate continues, will it reach profitability before cash runs out (default alive) or not (default dead)?
Should I include founder salaries in burn rate?
Yes, if founders are taking market-rate salaries. If founders are taking below-market salaries, note this as a hidden subsidy that will need to be addressed as the company grows.
What is a good runway for a Series A fundraise?
Most Series A investors want to see 18-24 months of runway post-investment. This typically means raising when you have 12-18 months remaining so the new capital extends to 18-24 months.
How does seasonality affect burn rate?
If your business has seasonal revenue, calculate runway using conservative revenue assumptions rather than peak months. Model multiple scenarios.
Calculate Your Runway Now
Use our free burn rate calculator to understand your startup's financial position. No signup required.
