Definition
Burn rate is the amount of cash a company spends beyond what it earns in a given month. Gross burn is total monthly spending; net burn is spending minus revenue, the number that actually depletes the bank account. Runway is cash in the bank divided by net burn, expressed in months: how long the company survives if nothing changes. A company with €2.4 million in the bank and a net burn of €100,000 a month has 24 months of runway.
In a company, burn rate and runway are the two numbers a founder should be able to state at any moment, because they set the deadline for everything else: reaching profitability, raising the next round or changing course. Investors also look at burn multiple, net burn divided by net new ARR, to judge how efficiently cash turns into growth. In 2026 benchmarks, a burn multiple under 1.5 is competitive for early-stage companies, and investors typically expect 18 to 24 months of runway after a round.
The misconception is that burn is bad and low burn is good. Burn is a choice about speed: spending too little can be as fatal as spending too much if a competitor takes the market. The real error is burn without a plan, where each month passes and the metrics that would justify the spend do not move. Fundraising typically takes 6 months or more, so the moment to act on a short runway is well before 12 months, not at 6.
In practice
A startup with €1.5 million in the bank, €150,000 in monthly costs and €50,000 in monthly revenue has a net burn of €100,000 and 15 months of runway. If it adds €30,000 in net new ARR each month, its burn multiple is over 3, a signal to fix efficiency before raising again.
Why it matters
Runway is the clock every other decision runs against. Having built +10 companies, some funded and some bootstrapped, I have seen more companies fail from losing track of this number than from any competitor. Know it monthly, and act when it falls below 12 months.
Frequently asked questions
- How many months of runway should a startup have?
- At least 12 months at all times, and 18 to 24 months right after a funding round, which is what investors in 2026 typically expect. Fundraising takes 6 months or more, so a company should start raising or cutting costs when runway drops to around 12 months, not later.
- What is the difference between gross burn and net burn?
- Gross burn is total monthly cash spending on salaries, rent, tools and everything else. Net burn is that spending minus the cash revenue coming in. Net burn is the number that determines runway, because it shows how fast the bank balance actually falls each month.