Runway
What is Runway?
In finance, especially in the startup and business context, Runway refers to the amount of time a company can continue operating before it runs out of cash, assuming its current burn rate (monthly expenses) stays the same.
It answers the question: "How many months can we survive with the money we have?"
Formula
Runway (in months) = Cash on Hand ÷ Monthly Burn Rate
Cash on Hand: Total available liquid funds
Burn Rate: Average monthly cash outflow (typically expenses minus revenue)
Example
If a startup has ₹60 lakh in the bank and spends ₹10 lakh per month:
Runway = ₹60 lakh / ₹10 lakh = 6 months
That means the company can survive for 6 months without new revenue or funding.
Why Runway Matters?
- Helps startups plan fundraising timelines
- Assists in cost control and cash flow management
- Indicates how urgent it is to generate revenue or cut costs
- Investors often ask: “What’s your runway?” to assess financial health
Ways to Extend Runway
- Cut Costs: Reduce staff, rent, or marketing spend
- Increase Revenue: Boost sales or upsell existing customers
- Raise More Capital: Through equity or debt
- Optimize Operations: Automate or renegotiate contracts
Runway in the Indian Startup Context
Indian startups typically raise funding to secure 12–18 months of runway.
During economic slowdowns, many focus on extending runway rather than scaling fast.
Common advice: Start fundraising at least 6 months before runway ends.
Runway vs. Burn Rate
- Burn Rate tells you how fast you’re spending money.
- Runway tells you how long you have before the money runs out.
- They go hand in hand in startup and financial planning.