Startup runway & burn rate calculator

Gross burn, net burn and why the distinction matters

Gross burn is total monthly cash out. Net burn is cash out minus cash in — the number that actually determines how long you survive. A company spending $438,000 a month with $185,000 of revenue has a net burn of $253,000, and that is the figure to divide into the bank balance.

The trap is reporting gross burn to the board because it sounds more impressive, then managing against net burn in practice. Both numbers belong on the page, with the runway calculated from net burn. If revenue is growing, runway is longer than the simple division suggests — which is why a straight-line calculation is a floor, not a forecast.

Net burn      = Total monthly expenses − Monthly revenue
Simple runway = Cash ÷ Net burn          ← a floor, ignores growth

Accurate runway: iterate monthly, compounding revenue,
                 until cash ≤ 0 → that month is the zero-cash date

Burn multiple: the efficiency metric investors actually use

Burn multiple is net burn divided by net new ARR. It answers the question "how much cash did we burn to acquire each dollar of new recurring revenue?" Under 1x is exceptional, 1–1.5x is efficient, 1.5–2x is acceptable, and above 3x means growth is being bought rather than built.

This metric replaced the older "growth at all costs" framing because it captures both sides of the equation. A company burning $3M a year to add $1M of ARR has a burn multiple of 3 and will not survive a funding winter, regardless of its growth percentage.

The funding window is a cash decision, not a calendar one

Raising takes three to six months from first meeting to wire, longer in a difficult market. Starting the process with six months of runway means negotiating with a gun to your head; starting with twelve means choosing your terms. The workbook calculates the month by which you should be in market — runway minus six months — as an explicit number.

The corollary is that fundraising is not a growth activity, it is a risk activity: you raise to remove the risk of running out, not to accelerate a business that is already working. Companies that raise only for acceleration consistently over-raise relative to what they can deploy efficiently.

• Begin the round with at least nine to twelve months of runway; six is the floor, not the target.
• Model the worst case: revenue growth flat and one major customer lost.
• Bridge rounds are more expensive than the round you could have raised earlier.
• If the funding window is already behind you, the answer is cost reduction, not a faster process.

Headcount is the lever that decides runway

In most software companies, people are 65–80% of the cost base. That means the runway number is largely a hiring decision, and the headcount plan deserves its own model rather than living as a single line in a P&L.

The workbook’s departmental tab models hires by quarter with fully burdened salaries — base plus employer burden of roughly 24–28% — and reports payroll as a percentage of current revenue. Above 60% of revenue, the hiring plan is not fundable at current growth rates

• Model hires by quarter and department; annual totals hide the cash timing.
• Use fully burdened cost, not base salary — the difference is 25%+ and it is all cash.
• Payroll above 60% of revenue with a negative burn multiple is a plan that requires a raise, not a plan that works.
• Engineering hires are typically the largest single line and the longest to convert into revenue.