- What's the difference between gross burn and net burn?
- Gross burn is the total amount of cash a company spends each month on operating expenses — salaries, rent, software, marketing, infrastructure. Net burn is gross burn minus monthly revenue. A company with $200k of monthly operating expenses and $80k of monthly revenue has a gross burn of $200k and a net burn of $120k. Investors track runway against net burn because revenue genuinely extends the timeline; gross burn alone overstates how fast the cash disappears. When people say "burn rate" without qualifying it, they almost always mean net burn.
- How do I calculate runway?
- Runway = current cash ÷ monthly net burn. A company with $1.2M in the bank and a $100k net burn has 12 months of runway. The math is unforgiving: if you spend faster, runway shrinks proportionally; if revenue grows or expenses drop, runway extends. The harder math is choosing which cash number to use — most operators use the ending cash from the latest closed month, not a forward-projected balance.
- What's a healthy runway?
- Depends on the funding stage. Standard SaaS guidance: Seed companies should hold 12-18 months of runway after a round, Series A teams aim for 18-24 months, and post-Series-B operators stretch to 24+ months. Below 12 months is the fundraising window — investors expect to see a deck. Below 6 months is the panic window — the company is solving a near-term cash crisis, not a long-term growth problem. The right target is enough runway to hit the metrics that unlock the next round, plus 3-6 months of slack for the round itself to close.
- What if my cash is growing instead of shrinking?
- Then revenue exceeds expenses over this window — the company is cash-flow positive at the current pace. Net burn is negative (cash grew). Gross burn still shows your monthly operating cost, which is useful for understanding how dependent you are on revenue continuing. The calculator labels this state as "cash positive" and reports indefinite runway. The risk shifts from running out of money to whether revenue can stay above expenses if anything changes — a big customer churns, a salesperson misses quota, marketing costs spike.
- Should I use a 1-month or 3-month average for burn rate?
- Both have a purpose. The 1-month figure reflects current pace and catches recent hiring or one-time costs — useful for board updates and short-term planning. The 3-month rolling average smooths out lumpy expenses (annual subscriptions, contractor invoices, recruiting fees) and is the number most investors want to see in a diligence conversation. Use 1 month for the current snapshot, 3 months for the trend, and 6 or 12 months when comparing year-over-year changes in efficiency.
- Does burn rate include non-cash expenses like depreciation?
- No. Burn rate is a cash metric — it only counts dollars actually leaving the bank. Depreciation, amortization, and stock-based compensation are accounting expenses that hit the P&L but not the bank balance, so they don't affect burn. This is why a company can be reporting GAAP losses while having a manageable burn rate, or vice versa. For runway math, what matters is what the bank statement says at the end of the month, not what the income statement says.
- How does burn rate relate to CAC and LTV?
- Burn rate is the rate of cash consumption; CAC (customer acquisition cost) and LTV (customer lifetime value) explain whether the burn is producing durable revenue. A high burn rate paired with low CAC and high LTV is usually fine — you're efficiently converting cash into a growing revenue base. A high burn rate paired with high CAC and uncertain LTV is the dangerous combination, because the cash is going out faster than the revenue it's buying can pay it back. Investors look at burn in the context of unit economics, not in isolation.
- What does "default alive" mean and how does it relate?
- Paul Graham's framing: a startup is "default alive" if it can reach profitability on current cash and current growth rate without raising another round. "Default dead" means it will run out of cash before getting to break-even unless it raises. The Burn Rate Calculator is one input to that judgment — it tells you how long the cash lasts at today's net burn, but the harder question is whether revenue will grow fast enough to flip the equation before runway expires. Most early-stage startups are default dead and that's fine; the discipline is knowing which one you are and what would change it.
- Is my burn rate "too high"?
- There's no universal threshold — it's burn relative to milestones. A $500k/month burn is reasonable for a $20M Series A team pushing toward $5M ARR; the same burn at a $2M Seed company is alarming. The two questions to ask: (1) Is the burn buying real progress against the metrics that unlock the next round? (2) Does runway get me to those metrics with 6 months of slack for fundraising? If both are yes, the burn is appropriate. If either is no, the burn needs to come down — usually by cutting headcount, slowing hiring, or renegotiating the biggest line-item expenses (cloud, sales tooling, marketing).
