The runway of a startup is the number of months of cash reserves remaining at the current burn rate, before the company runs out of cash and must either raise additional funds or achieve profitability. It is the most immediate survival indicator for any pre-profitability growth company, and conditions the urgency and terms of the next fundraising round.

‍

Its formula is: Runway = Cash balance / Net monthly burn rate. A startup with CHF 1.8 million in cash and a net burn of CHF 120,000/month has a runway of 15 months. The conventional wisdom is that a startup should maintain a minimum 12-month runway at all times — and ideally 18 months — to allow sufficient time to prepare, execute and close a new fundraising round without being forced to accept unfavourable terms.

‍

The runway interacts with the ARR growth trajectory: a startup that can demonstrate it will reach cash-flow breakeven within its current runway is in a fundamentally stronger negotiating position than one that will run out of cash before profitability. Investors systematically model the runway extension scenarios in their investment memos.

‍

In due diligence, the runway is validated by analysing the monthly cash flow statements over the past 12 to 24 months, identifying burn rate trends and stress-testing the financing plan under adverse scenarios (slower growth, higher churn, delayed fundraising close).

‍

Example: a Swiss health tech startup has CHF 2.4 million in cash and a net burn of CHF 160,000/month — runway of 15 months. Its Series A target raise is CHF 6.0 million with an expected 6-month process. Effective runway to close: 15 - 6 = 9 months of comfortable buffer. The company begins its fundraising immediately to preserve negotiating leverage.

‍

At Hectelion, we validate runway calculations and financing plan sustainability in our startup valuations and investment committee preparation mandates.