From Startup Fortune · · 1m 40s
How to Calculate Default Alive Runway for Startups
Startup runway spreadsheet shows when cash runs out before profit.
In brief
Startup runway spreadsheet shows when cash runs out before profit. A startup with $600,000 cash, $30,000 monthly revenue, and $90,000 monthly expenses has a default alive runway of 10 months if revenue grows 12% monthly and expenses rise 2% monthly. Originally reported by Startup Fortune.
Quick answers
- What is default alive runway?
- A startup's cash runway without growth or commitments.
- What is the key takeaway from How to Calculate Default Alive Runway for Startups?
- A startup with $600,000 cash, $30,000 monthly revenue, and $90,000 monthly expenses has a default alive runway of 10 months if revenue grows 12% monthly and expenses rise 2% monthly.
What is default alive runway?
A startup's cash runway without growth or commitments.
“A small spreadsheet shows which way, and by how many months”
Naive runway formula fails
It ignores growth and commitments, overstating or understating cash.
“You can be wrong by months either way”
Startup example with 12% growth
A company with $600,000 cash, $30,000 revenue, $90,000 expenses reaches profit in month 12.
“Revenue passes expenses in month 12, at about $116,900 against about $114,100”
4% growth leads to cash runout
Same startup runs out of money in month 10 with 4% monthly revenue growth.
“Cash runs out in month 10”
Committed spend impacts runway
Two signed job offers worth $16,000 monthly push profitability from month 12 to 14.
“Profitability slips from month 12 to month 14”
How to build the spreadsheet
Six inputs: cash, revenue, expenses, revenue growth, expense growth, committed spend.
“That's all. Every extra input makes the answer feel more precise and makes it easier to fool yourself”
Monthly calculations
Revenue and expenses grow each month with formulas.
“Net is revenue minus expenses. Cash is last month's cash plus net”
Default alive test
Cash stays above zero until profitability is reached.
“The minimum of the cash column tells you how close you get to zero”
Growth rate accuracy
Use actual compound growth rate from last 3-6 months.
“If revenue went from $18,000 to $30,000 over six months, the monthly rate is (30,000/18,000)^(1/6)-1, about 8.9%”
Realistic growth rates
Most startups have 12% monthly growth, not 4%.
“A 7% weekly rate compounds to roughly 34% a month. Most founders reading this aren't near that”
Committed spend details
Signed offers, leases, contracts, and cloud services count as committed spend.
“An annual contract paid upfront for $36,000 is a $36,000 hit in one month”
Adjusting for reality
Split fixed and variable costs to avoid overestimating growth.
“Split the lump into fixed costs and variable costs as a percentage of revenue”
Growth decay
Growth rates slow over time, so test with declining rates.
“Add a column that shrinks the growth rate by 5% each month (multiply the previous month's rate by 0.95)”
Investor use of the model
Investors run similar calculations without seeing the spreadsheet.
“A founder who arrives with a growth-adjusted runway and a committed-spend schedule has answered the two questions the partner was about to ask”
The key point
A startup with $600,000 cash, $30,000 monthly revenue, and $90,000 monthly expenses has a default alive runway of 10 months if revenue grows 12% monthly and expenses rise 2% monthly.
