How to maintain your startup’s funding runway

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Cash is the oxygen of your startup. Without it, even the best ideas suffocate.

Most startups don’t fail because they don’t have a good product; they fail because there’s no more money left.

The irony is, the founders often don’t see it coming. One day, everything feels fine. The next, they’ve got three months left in the bank, and every decision feels like a race against the clock.

If you’ve made it past the ideas stage, the difference between surviving and shutting down often comes down to managing your money

In this guide, we break down the key elements of keeping your startup afloat: how to measure your runway, how to stretch it without killing growth, and how to make sure you’re always a step ahead of financial disaster.

Step 1. Know your startup’s burn rate and your runway

Startups die when the money runs out. That’s why you need to know your burn rate and your runway.

Burn rate

Your burn rate is how much money your company spends each month. It is split into

  • Gross burn rate: The total amount of money your startup spends in a month (e.g. salaries, rent, operational costs).
  • Net burn rate: The amount spent each month, accounting for any money coming in (e.g. income, revenue)

You calculate your net burn rate with the formula

  • Net Burn Rate = Gross Burn Rate − Monthly Revenue

So let’s say your total spending is $70,000 a month, but you bring in $20,000 in revenue that month:

  • Net Burn Rate = $70,000 (Gross Burn Rate) – $20,000 (Monthly Revenue)
  • Net Burn Rate = $50,000

You have a net burn rate of $50,000 a month i.e. your startup’s back balance is going down by $50,000 each month.

Keep track of this number. It can change as your expenses rise or fall. Look at past months to calculate an average burn rate, so you can better plan ahead.

Once you’ve got your burn rate, you can now use this to work out your runway.

Runway

Your runway which is the amount of time (measured in months) your startup can operate before you run out of cash.

This is the formula:

  • Runway = Current Cash / Monthly Net Burn Rate

So let’s say you have $200,000 in the bank, and you have a net burn rate of $50,000 a month.

  • Runway = 200,000 (Current Cash) / 50,000 (Burn Rate)
  • Runway = 4

That gives you four months to figure things out before your bank account hits zero (because $200,000 divided by $50,000 is 4).

As a founder, your job is to buy yourself as much time as possible to figure things out. The longer you can survive, the better your chances of success.

In the early stages, startups are fragile. You’re testing ideas, finding if your product fits the market, and learning what works. If your runway is short, you’re constantly under pressure, which makes it hard to make breakthroughs.

Investors notice this too. A short runway makes them worry that you’re just trying to stay afloat. A long runway shows stability, which builds trust and gives you more leverage when negotiating.

Step 2. Cut your costs

When a startup runs out of money, it’s often not because they didn’t raise enough, it’s because they spent too much, too fast.

Cutting costs is painful, but what makes it easier is knowing where to cut without strangling your growth. Start by breaking down your expenses into:

  • Fixed costs: These expenses stay the same, regardless of what’s happening in your startup (e.g. rent, long-term contracts).
  • Variable costs: These expenses change based on business activity, such as how much your startup produces or sells (e.g. materials, marketing).

Fixed costs are harder to reduce in the short term, whereas variable costs often have room for adjustment. So start with them.

  • Negotiate better deals: Talk to suppliers to get discounts for bulk orders or long-term agreements.
  • Optimise production: Streamline processes to reduce waste, use less energy, or improve efficiency.
  • Outsource or automate: Outsource tasks to lower-cost providers or use technology to automate repetitive work.
  • Use shared resources: Share equipment, office spaces, or tools instead of buying your own.
  • Buy smart: Look for alternative materials or suppliers that offer the same quality at a lower price.
  • Reduce shipping costs: Consolidate shipments or use a logistics provider with better rates.
  • Control inventory: Avoid overstocking by only ordering what you need to reduce storage costs and waste.

Every expense should be tied to a clear outcome. Catered lunches or premium tools might feel nice, but they don’t bring you closer to survival.

But at the same time, don’t fall into the trap of cutting everything. You can ask some questions to help decide how to cut:

  • Does this expense help build a better product?
  • Does it help us get customers faster?
  • Does it support our team to get the job done?

If the answer to all three is no, cut it.

Here’s an example of what this might look like: a startup was burning cash faster than they thought.

Instead of slashing everything, they paused spending on low-performing ads, renegotiated supplier deals, and rented out part of their office space.

These changes gave them four more months of runway. They used that time to improve their product and close a funding round.

Cutting costs and reducing your burn rate is about being smart. Every dollar you save buys you time, and in a startup, time is often the difference between making it and missing it.

Step 3. Forecast and plan finances

Running a startup without a financial plan is like driving without a map. You might feel like you’re making progress, but you’ll likely end up lost – or worse, stranded.

So let's start with the basics.

Cash flow forecast

A cash flow forecast is a plan that shows how much money you expect to come in and go out of your business over a certain period of time. This looks like:

  • Cash in: Money from sales, loans, or investments.
  • Cash out: Money spent on bills, wages, or supplies.

Be brutally honest about your revenue, expenses, and the gaps between them. Your forecast helps you see if you’ll have enough cash to cover your expenses. So if you’re not truthful, you might run into trouble.

Forecasting your cash flow is one of the most valuable habits you can build as a founder.

But forecasting isn’t just about numbers, it’s preparing for the unexpected.

Scenario planning

Scenario planning is your safety net. This is a process you startup can use to prepare for the future by imagining and planning for different possible situations.

It helps you think about "what if" scenarios and make better decisions. There are three steps.

First, focus on factors that could affect your business, like market trends, competition, or economic changes.

Second, imagine a set of different situations, like:

  • Best-case scenario (everything goes well).
  • Worst-case scenario (things go badly).
  • Most-likely scenario (based on current trends).

Third, develop strategies for each situation to minimise risks or take advantage of opportunities. For example, if a supplier raises prices, and that’s a worst-case scenario for you, you might plan to negotiate a discount or find a cheaper supplier.

To make all this a bit easier, use tools that simplify financial planning. Software like Xero, QuickBooks, or even Google Sheets in a pinch can help you track, predict, and adjust your cash flow. There’s no reason to fly blind with so many resources at your disposal.

War chest

Startups often face chaos. A big client might leave, a competitor could pop up, or a key team member might quit – all at the worst possible time.

That’s why it’s smart to build a small financial buffer, often called a “war chest.” Even just one or two months of extra runway can give you the breathing room to handle unexpected challenges without throwing your whole business off track.

This doesn’t mean you should hoard cash and stop investing in growth. But if you’re in a good position and have a chance to extend your runway without hurting progress, it’s worth doing.

A little extra runway can make a big difference when the unexpected happens.

Step 4. Focus on early revenue

For startups, raising money is often seen as the goal (and we’ll cover it soon). But the best funding isn’t from investors, it’s from customers.

Revenue doesn’t just keep the lights on; it validates your idea and gives you leverage when you do need to raise capital. Here’s what you need to know.

1. Start as soon as you can

Too many founders wait for their product to be “perfect” before trying to sell. But perfection is a trap.

If you can deliver value – even with a minimum viable product – start charging your customers for it.

This is a key piece of advice from Stone & Chalk founder Nick Frandsen (of Paloma, and Afterpay: one of Australia’s fastest growing fintech startups):

“Start selling your product early on if you can, especially if you are growing quickly. This will enable you to validate yourself and receive honest feedback from paying customers.”

Early paying customers are a treasure trove of feedback to help you improve. Make sure you use it.

2. Test different models

If your current way of making money isn’t working, don’t be afraid to try something new. You might discover an untapped market or a better pricing model.

For example, we had a SaaS startup that was struggling with one-off sales transitions. When they moved to a subscription model, it gave them consistent monthly revenue that extended their runway and impressed investors.

It’s also worth remembering that it’s usually cheaper and easier to sell more to an existing customer than to find a new one. Think about your broader offering, what extra value can you provide? This could help you adjust your pricing or add new revenue streams.

If you haven’t launched yet, but are building something people are excited about, consider pre-orders. If they really want it, many people will pay upfront to be first in line.

3. Use early revenue to strengthen your base

The more you bring in, the less reliant you are on external funding – and the more negotiating power you have when talking to investors.

A startup generating $10,000 a month looks very different from one that’s burning cash without a cent of income. A startup that can show a clear path to sustainable revenue is more attractive than one that’s burning through funds.

Even modest profitability can give you the runway to take bigger risks and invest in growth without worrying about the next funding round. And the more your startup earns, the more decisions you get to make on your terms.

Step 5. Raise funding for your startup

Once you’ve cut costs and started to bring in money, to increase your runway you may need to raise money.

When it comes to raising funds, timing and strategy are everything. Many founders wait too long to start raising, hoping things will miraculously improve.

By the time they approach investors, their runway is almost gone, and desperation has set in. Investors can sense this a mile away, and it’s not a good look.

To avoid this, start planning your fundraising well before you need it. Ideally, begin discussions with investors when you still have at least 6–9 months of runway left.

This gives you time to negotiate from a position of strength and focus on finding the right partners, rather than scrambling for any deal you can get.

Aim to raise enough to extend your runway by 18-24 months. This gives you enough time to reach meaningful milestones and avoids the constant distraction of raising new rounds.

Here’s three steps to go about this process:

1. Know your funding options

At the early stage, you might be looking at pre-seed or seed rounds, bootstrapping, government grants, or angel investors.

Each has its pros and cons, so it’s important to align your funding strategy with your goals.

For instance, grants can give you runway without dilution, while angel investors might bring valuable mentorship along with capital.

The best place to start is reading our free Capital Raising Guide for Startups.

2. Build the right pitch

Investors need to believe in two things: that your startup has potential and that you’re the right person to lead it.

The best way to show this is with results. Numbers like increasing revenue, growing users, or keeping customers (i.e. churn rate) help prove your business is on the right track.

In your pitch, be transparent about your financials, explain how you’ll use the funds, and show how they’ll directly extend your runway and drive growth.

If an investor asks tricky questions, be ready with clear, confident answers. Show them you know your business inside and out.

The better your pitch, the more favourable terms you’ll be able to negotiate. Here’s our AI for Founders webinar on how to better build your pitch deck.

3. Make a great deal

Don’t give away too much equity too soon. Early-stage founders often over-dilute their stake in exchange for capital.

The book Venture Deals by Brad Feld and Jason Mendelson is an essential read to help you navigate negotiations and avoid rookie mistakes.

Raising funds is also where you can build relationships to set your startup up for long-term success. If you raise strategically, you’ll not only extend your runway but also position your startup for the next stage of growth.

Final thoughts

For early-stage startups, your runway buys you the time and space to succeed.

When you know your runway and take steps to manage it wisely, you create a buffer that protects your idea and gives it a real chance to thrive.

The truth is simple: startups that manage their cash survive, and those that don’t, fail. But survival is just the first step. A longer runway means more time to test ideas, grow, and stand out in a competitive market.

Here’s a summary of what you can do to maintain your runway:

  • Calculate your runway: Know exactly how many months of funding you have left.
  • Cut spending: Identify areas where you can slash costs without sacrificing your growth.
  • Make a plan: Build out a system to track money coming in and out.
  • Grow revenue: Focus on building income to extend your runway.
  • Plan for fundraising: Build relationships with investors early so you’re ready when the time comes; then pitch with confidence.

Small, deliberate actions today can make a huge difference over time. Every extra month of runway you create gives your startup more opportunities to iterate and grow.

Manage your runway well, and you’ll have the time you need to turn your vision into reality. The clock is ticking, but with the right moves, every second can count.