पाठशाला Pathshala · धन Dhan, Money · Lesson 01 · Start
Runway: how many months you really have
Cash divided by burn is the answer to the wrong question. The right one is whether the company is default alive, and the date by which you must know.
Pathshala, The Founder Library · 10 October 2026 · 5 min read
Ask ten founders how much runway they have and nine will divide the bank balance by last month’s burn. It is the first number an investor checks and the one most often wrong, because it assumes the company stands still. Companies do not stand still. Revenue grows, or does not. Costs grow, always.
This lesson does three things. It gives you the arithmetic done properly. It gives you the question that matters more than the arithmetic. And it gives you the calendar, because the number is only useful if it tells you what to do on a given Monday.
The arithmetic, done properly
Start with three figures you can read off your bank statement and your books: cash in the bank, revenue last month, cost last month. Net burn is cost less revenue. Naive runway is cash divided by net burn.
Now add the two things that move. Revenue grows at some rate a month; costs grow too, because the people you hire in month three are paid in months four to twelve, the servers scale with the users, and every tool you sign up for renews. A company adding two engineers a quarter has a cost line rising at two to three per cent a month even with no salary increases. Run the simulation month by month and read off two dates: when cash reaches zero, and when revenue covers cost.
The slider labelled cost growth is the one to be honest about. Most founders set it to zero in their heads, and it is the reason a twelve-month runway becomes a nine-month one without anyone deciding anything.
The question that matters more
In October 2015 Paul Graham wrote a short essay called Default Alive or Default Dead? and it remains the single most useful page on this subject. The question: assuming expenses stay constant and revenue growth continues as it has, does the company make it to profitability on the money it has? If yes, it is default alive. If no, default dead.
Graham’s observation was that founders almost never know the answer, and that most who do not know are default dead. The reason the question beats the runway number is that it forces growth into the calculation. A company with eight months of cash and twelve per cent monthly revenue growth may be fine. A company with eighteen months of cash and two per cent growth is in trouble; it just has longer to notice.
A long runway with no growth is not safety. It is a slower way to find out.
The two states call for opposite behaviour. Default alive means you can raise if you want to, on your terms, or decline. Default dead means that one of three things has to change: revenue growth, costs, or the money. Graham’s warning is that founders in the second state usually reach for the third fix first, and that investors can see the state before the founders admit it.
Why six months is the floor, and why it is longer in India
Y Combinator’s guide to seed fundraising tells founders to raise enough to reach the next milestone with margin, which in practice means twelve to eighteen months of operation, and to begin the process well before the cash is needed. The conventional floor is six months: begin a raise with at least six months of cash in the bank.
The reason is that a round is a process, not an event. First meetings to a term sheet takes six to twelve weeks when it goes well. A term sheet to money in the bank adds due diligence, documents and the slowest signatory. In India add the specifics: an investor pool that is thinner outside Bengaluru, Delhi NCR and Mumbai; angel rounds that close in tranches; and, for foreign money, the compliance steps that follow a foreign direct investment into an Indian private company, which do not move at a founder’s pace. A seed round that takes four months is a good outcome here. One that takes six is normal.
So the useful line on the chart is not zero cash. It is zero cash minus six months. That is the latest Monday on which the first investor email can go out. The tool draws it as the dotted line.
What to do with the two dates
Put both on a wall where the founders see them. Then adopt a rule that converts them into behaviour, because a number nobody acts on is decoration.
If the break-even date comes before the zero-cash date, the company is default alive. The job is to protect that state. Every hire should be tested against it: does this person move break-even forward, or push zero-cash earlier faster than they move break-even? Fundraising becomes optional, and optional raises are the ones done on good terms.
If zero-cash comes first and the gap is small, there is a credible path by increasing growth or trimming cost, and the honest move is to pick one, write down the number it must hit by a date, and review it monthly. Not quarterly. A quarter is a third of your remaining life.
If zero-cash comes first and the gap is large, the raise starts this week, and the first conversation is with the existing investors, because they already know the state and would rather hear it from you with a plan than from the bank balance later. If there are no existing investors, the plan includes what you will cut if the raise fails, with the date on which you will cut it. Sequoia’s May 2022 memo to its founders, Adapting to Endure, made the same point under worse conditions: the companies that survive a tightening are the ones that move first.
The three mistakes that eat runway quietly
Counting receivables as cash. An invoice is a promise. In India, a promise from a large customer can take ninety days to turn into money, and the MSME payment rules exist precisely because it often takes longer. Runway is computed on cash in the bank, not on what you are owed.
Counting a committed round as cash. Until the money has cleared, it is not yours. Rounds fall through at the signature stage more often than founders expect, usually because a lead changed their mind about something unrelated to you.
Treating the founder’s own money as infinite. The months in which a founder stops paying themselves to extend runway are real months of runway, but they are borrowed from the founder’s own life, and they end. Count them, label them, and do not plan to spend them twice.
A monthly ritual, in ten minutes
On the first working day of each month, update three numbers in the tool above, or in a sheet of your own: cash, revenue, cost. Read the two dates. Say out loud which state the company is in. If the state changed, say what changed it. Then decide one thing. That is the entire discipline, and it is the one most companies that died for want of money never had.
Nothing here is financial advice. It is arithmetic, and a question. The sources are below; read Graham’s essay in full, it takes four minutes.