Most startups die because they run out of cash, not ideas. This Complete Founders' Guide to Burn and Runway matters because your runway number dictates whether you hire that engineer, when you start fundraising, and if you can afford to pivot. But here's what catches founders off guard: calculating burn rate and runway once a month means you're making decisions on stale data. The founders who maintain cash reserves and avoid emergency fundraising track these numbers weekly. We'll show you exactly how to calculate both, what benchmarks investors expect in 2026, and when those warning signs mean you need to act now.
TLDR:
Burn rate is how fast your startup spends cash. If you're spending $50,000 monthly and earning $20,000, you're burning $30,000 each month. Run out at that pace, and your company shuts down.
Gross burn rate measures total monthly spending before revenue. If you spend $50,000 on payroll, software, and rent, that's your gross burn.
Net burn rate subtracts monthly revenue from total spending. With $50,000 in costs and $20,000 in revenue, your net burn is $30,000. This number drains your bank account.
Investors expect both figures. Gross burn reveals your cost structure. Net burn shows how quickly you're approaching zero.
Runway is the number of months until your bank account hits zero. Take your current cash balance and divide it by your monthly net burn. If you have $300,000 in the bank and burn $30,000 monthly, you have 10 months of runway.
This number matters more than revenue growth or product roadmaps when you're running low. Runway dictates every decision: whether to hire that engineer, when to start fundraising, if you can afford to pivot.
Most startups die because they run out of cash, not because they run out of ideas. Your runway tells you exactly when that happens. Twelve months means you have breathing room. Six months means fundraising needs to start now. Three months means you're in crisis mode.
Watch this number weekly, not monthly. Your survival depends on it.
Investor expectations have shifted. VCs now expect 24 to 30 months of runway with steady growth between 20% and 30% annually. The growth-at-all-costs era is over.
Early-stage startups burn roughly $50,000 monthly on average, though this varies by industry and stage. Pre-seed companies typically run leaner at $20,000 to $40,000 monthly. Seed-stage startups with initial team hires often burn $50,000 to $100,000. Series A companies with 15 to 25 employees can hit $150,000 to $300,000 monthly.
SaaS startups burn less than hardware companies. Remote teams spend less than those with office leases. Your number should reflect your specific situation, but if you're burning 2x these benchmarks without corresponding revenue growth, you have a problem.
Investors won't fund companies with under 12 months of runway unless traction is exceptional.
Start with your bank balance. Open your account right now and write down the exact number. Let's say it's $240,000.
Next, calculate your gross burn by adding up everything you spent last month: payroll, software subscriptions, rent, contractors, ads, insurance. If that total is $80,000, that's your gross burn rate.
Now calculate net burn by subtracting monthly revenue from gross burn. If you brought in $25,000 last month, your net burn is $55,000. This is the actual cash leaving your account each month.
To find your runway, divide your bank balance by net burn: $240,000 divided by $55,000 equals 4.4 months. Round down, never up. You have four months of runway.
Use gross burn when evaluating your cost structure or talking to investors about unit economics. Use net burn for runway calculations and weekly cash management.
Your calculated runway assumes perfect conditions. Things never go perfectly.
A key hire takes three months longer than expected. A major customer churns. Your payment processor holds funds for 30 days. AWS bills spike. Any of these can add weeks to your burn rate.
Smart founders maintain a buffer beyond their stated runway. If you tell investors you have 12 months, you should actually have 15 months in the bank. This cushion protects against the inevitable surprises.
Cash reserves change your negotiating position. When you're fundraising with 18 months of runway, you can walk away from bad term sheets. When you're down to three months, you take whatever you can get at whatever valuation investors offer.
The founders who maintain reserves control their timeline. The ones who don't become desperate, and investors can smell desperation from miles away.
Your burn rate becomes unsustainable long before you hit zero. Catching the warning signs early means you can course correct instead of scrambling for emergency funding.
The clearest red flag is your burn multiple: divide net burn by net new ARR. If you're burning $60,000 monthly while adding $20,000 in new recurring revenue, your burn multiple is 3x. Anything above 2x means you're spending too much relative to growth. Below 1.5x is healthy.
Watch for burn growth outpacing revenue growth. If spending jumped 40% last quarter while revenue grew 15%, you're heading the wrong way. Nearly 3 in 10 startups fail because they run out of money.
Less than six months of runway is the danger zone. At that point, you don't have time to fundraise properly or make operational changes stick.
Start by auditing your monthly recurring costs. Cancel subscriptions your team hasn't touched in 30 days. Renegotiate SaaS contracts by asking for annual discounts or switching to usage-based pricing. One founder cut $8,000 monthly by consolidating tools doing similar jobs.
Don't touch payroll first. Fire headcount only after exhausting every other option. Instead, pause new hires and implement a hiring freeze until revenue catches up. Every open role you don't fill extends runway by months.
Revenue acceleration matters more than cost cuts. If you can double sales cycles or boost conversion rates by 20%, you improve net burn faster than eliminating expenses. Focus sales on prospects likely to close within 30 days.
Move variable costs ahead of fixed ones. Contractors instead of full-time employees. Coworking spaces instead of leases. Cloud costs you can dial up or down. Variable structures give you flexibility when cash gets tight.
Start fundraising when you have 12 to 18 months of runway remaining. Raising rounds takes six to nine months on average. Wait until you're down to six months, and you'll accept any terms offered. Investors sense desperation and negotiate accordingly.
Begin conversations early while you can still walk away from bad deals. Track your burn weekly, not monthly. Real-time visibility into your runway lets you time fundraising properly instead of scrambling when cash gets tight. Most founders wait too long because they don't see the warning signs until after month-end close. By then, you've lost weeks you can't get back.
Puzzle tracks your burn rate and runway automatically, updated daily instead of after month-end close. Connect your bank accounts, payroll, and financial stack in minutes. We calculate both gross and net burn in real time as transactions flow in.
Your dashboard shows current runway based on your actual bank balance and spending patterns. No spreadsheet formulas or manual updates needed. When you spend $5,000 on a new contractor or close a $10,000 deal, your runway adjusts immediately.
The difference is visibility timing. Most founders calculate burn weeks after month-end when their bookkeeper closes the books. By then, you've already spent another month of cash. We give you the numbers you need when decisions still matter.
Our AI categorizes up to 98% of transactions automatically, so your burn calculations reflect real spending patterns instead of rough estimates. You can't manage what you can't see. We make burn and runway visible daily.
Burn rate is the most honest metric in your business. It tells you exactly how long you have to figure things out, close deals, or raise capital. The founders who make it past year two know their number by heart and watch it obsessively. Build that visibility now while you still have options, because waiting until you're desperate means you've already lost your negotiating power.
Divide your current bank balance by your monthly net burn rate (total spending minus revenue). If you have $240,000 in the bank and burn $55,000 monthly, you have about 4.4 months of runway (always round down, never up).
Start when you have 12 to 18 months of runway remaining. Raising rounds takes six to nine months on average, and waiting until you're down to six months forces you to accept whatever terms investors offer.
Gross burn is your total monthly spending before revenue. Net burn subtracts your monthly revenue from total spending, this is the actual cash draining from your account and the number you use to calculate runway.
VCs now expect 24 to 30 months of runway with steady growth between 20% and 30% annually. Investors rarely fund companies with under 12 months of runway unless traction is exceptional.
Divide your net burn by net new ARR. Below 1.5x is healthy, while anything above 2x means you're spending too much relative to growth. A burn multiple of 3x or higher signals unsustainable spending.
