Runway
Runway is the number of months a company can operate before its cash runs out at its current net burn — available cash divided by monthly burn. It is the clock every venture-backed company lives on: a round is raised with a year of it left, a bridge sought at six months, cuts or a sale at three. For a fintech, available cash excludes the licence's capital and the customers' money.
- Also known as
- Cash runway, Months of runway, Zero-cash date
- Used at
- every board pack, every investor update, every fundraising plan; investors ask for it before revenue
- Binding
- no — but a venture debt facility's minimum-cash covenant, or a bridge note's terms, can turn a runway figure into a default
- Typical planning
- raise a round sized for 18–24 months, start the next raise with 9–12 months left, so the process (3–6 months) closes with a cushion; a company that starts raising with four months left negotiates from weakness
- Typical extension
- cutting burn (headcount is 60–80% of it), a bridge from insiders, venture debt, or revenue that arrives earlier than planned
- Parties
- the founders and board, existing investors deciding whether to bridge, new investors reading the zero-cash date, and — in a fintech — the regulator, which may require a wind-down plan funded in advance
How runway works in practice
A company with €5m of available cash and a net burn of €400,000 has twelve and a half months. Its plan says the Series B closes in month ten on metrics it will reach in month eight; the board wants the raise to start in month five, with the deck ready in month four. If month eight's metrics arrive in month eleven instead, the raise starts late and the runway is four months when the first term sheet is discussed — and the term sheet's author knows it. Founders who understand this raise early, on a plan, rather than late, on a need.
The runway moves for reasons other than spend. Revenue that arrives lengthens it; a lost customer shortens it; a licence delay that postpones revenue shortens it while the burn continues; a regulator's request to hold more own funds shortens it without anything else changing. The honest figure counts only cash the company can spend: not the client money, not the regulatory capital, not the collateral, not the deposit on the office.
The decisions at each milestone are the same everywhere: at twelve months, raise; at six, bridge or cut; at three, cut deeply or sell; at one, the wind-down plan a regulated fintech was required to have written when it had twenty.
Example
A payments fintech's board pack shows €7.2m of cash and a €450,000 net burn: sixteen months. The CFO's note beneath: €2m is own funds required by the e-money licence, €0.8m is scheme collateral, and €0.4m is a safeguarding buffer — available cash €4m, runway nine months. The Series B was planned to start in month eight. The board brings the raise forward to month three, cuts €80,000 of monthly spend, and asks the Series A investors for a €2m bridge commitment as a backstop. The B closes in month eight at a valuation 15% below the plan's — a discount the board attributes to raising with five months left rather than eleven, and cheaper than the alternative the nine-month figure implied.
Common mistakes
- Runway computed on bank balances that include capital, collateral and client money. - Starting the raise when the runway is short enough to be visible in the negotiation. - Cutting burn to extend runway past the point where the milestones are still reachable. - Ignoring that a licence delay moves revenue, not spend. - No wind-down plan in a regulated fintech until the runway is the wind-down.