Corporate FinanceFinancial Glossary
Runway
Definition
The amount of time a company can continue operating at its current burn rate before running out of cash. Calculated as Total Cash Balance divided by Monthly Net Burn Rate. A company with Rs 3 crore in the bank and a net burn of Rs 20 lakh per month has a 15-month runway.
Why It Matters
Runway dictates the urgency of fundraising decisions. Most VCs recommend startups begin raising their next round when they have 6-9 months of runway remaining, since fundraising itself takes 3-6 months. Running out of runway without a funding plan forces desperate decisions — accepting unfavorable terms, fire sales, or shutdown.