What are burn rate and runway?

What is the difference between gross burn and net burn?

Gross burn shows the cash going out to run the business. Net burn shows how much operating cash you lose after customer payments come in. If you have no operating receipts, the two are equal.

Scroll the table sideways to read all columns.

Use the same month and currency for both sides of the calculation. State what you include, especially if you also have equipment purchases or debt repayments. Source: Carta's burn rate guide.

How do you calculate startup runway?

1. Find your available cash. Add the company cash you can actually use. Exclude restricted funds and investment that has not arrived. Record the balance date.
2. Calculate monthly net burn. Subtract operating cash collected from operating cash paid. For a simple starting estimate, average the last three complete months, then check whether that period reflects how you operate today.
3. Divide cash by net burn. If you have US$120,000 available and burn US$10,000 a month, your static runway is 12 months. This assumes no change in burn and no additional cash requirements.

If you have just started, build a monthly budget instead. Label it a forecast, because you do not yet have a spending history. For a team about to hire or launch, forecast each month's receipts and payments rather than assuming the historical average will continue.

Source: Stripe Atlas on runway and cash forecasting. The three-month starting window here is a practical suggestion, not a reporting requirement.

Is burn rate the same as an accounting loss?

No. Revenue can be recorded before a customer pays, and some accounting expenses do not involve a current cash payment. For runway, track when money reaches or leaves the account. Keep fundraising separate from operating receipts: a new investment adds cash, but does not make the business's operating burn smaller.

The SEC's guide to financial statements explains the distinction between profit and cash flow, and separates operating, investing and financing cash movements.

Worked example: runway for a startup in Taiwan

A hypothetical two-founder team has received US$100,000. At an illustrative exchange rate of NT$32 per US$1, that is NT$3,200,000. After paying NT$200,000 in setup costs, it has NT$3,000,000 left. These are teaching assumptions, not market cost benchmarks, a live exchange rate, or an example of an actual portfolio company.

The team pays NT$300,000 a month to operate and collects NT$50,000 from customers. Its net burn is NT$250,000, giving it 12 months of static runway. Now compare three possible plans from that same starting cash balance.

Scroll the table sideways to compare the scenarios.

The hire changes the estimate by about 3.4 months. The decision is whether the work that person can unlock justifies the shorter runway. Name the milestone, estimate its cost, and decide what evidence would make you continue or change the plan.

For USD funding and TWD expenses, use a consistent planning currency and show your exchange-rate assumption. If the dollars remain unconverted, test a less favorable rate and include conversion fees. A future change in the rate cannot change cash you have already converted.

What can make your runway estimate misleading?

For cash timing and liquidity, see Stripe Atlas's cash management guide. For payments outside operations, see the SEC's cash flow explanation.

How should bootstrapped founders plan their runway?

When you are funding the business yourself, runway is about how long you can keep building. Start with the money you have set aside, the costs of running the business, and the personal expenses you still need to cover. A simple spreadsheet is enough to make those assumptions visible.

• Set a business budget. Write down how much cash you have committed to the startup. Keep the savings you need for personal living costs separate, so the same money does not appear in both budgets.
• List the costs of keeping it running. Include software, hosting, contractors and any salary you pay yourself. Add one-time purchases and annual renewals in the months they fall due.
• Check your personal runway too. If the business does not pay you, work out how you will cover rent, food and other essentials. Low business spending alone does not tell you how long you can keep working on it.
• Choose the next thing you need to learn. That might be whether someone will pay for a pilot or return to use the product. Set a time and spending budget for that test before committing to more tools or hiring.
• Plan for slower sales. Check how long you can continue if customer payments arrive later than expected. Decide which optional costs you could pause and when you will review the plan.

The useful question is what your remaining time and money can help you learn. Revisit the budget as you get customer feedback, start collecting payments, or change how much time you spend on the startup.

Burn rate and runway FAQs