In our example, the company reaches break-even in Month 25. Its cash runs out in Month 16.
Nothing went wrong in that plan. Revenue arrived on time and grew 15% every single month.
The problem is the calendar: the business needs 25 months to prove it works, and the money lasts 16.
Below you'll learn why that gap opens, how to measure it in your own numbers, and five concrete moves to close it, with a free calculator to test each one.
Here is the full breakdown, built on one example: two founders launching a B2B SaaS with $600,000 raised at pre-seed, one engineer on the team, and first revenue expected in Month 4.
Inside you'll find:
The Plan Works. The Cash Doesn't.
The 20-Month Gap Is Longer Than It Looks
Why Your Runway Is Shorter Than Your Spreadsheet Says
How Much to Raise: Work Backwards From 18–24 Months
Five Moves When the Gap Doesn't Close
Get the Calculator: Your Launch Budget in 15 Minutes
1. The Plan Works. The Cash Doesn't.
Most founders think of running out of cash as a sign that something failed: the product, the market, the team. Often, nothing failed. The company simply ran out of time before the results showed up.
Look at our example founders. Monthly recurring revenue starts at $3,000 in Month 4 and reaches about $16,000 by Month 16. Any investor would call that traction. But fixed costs of almost $39,000 a month don't wait for traction, and the cash line crosses zero in Month 16. At its lowest point, in Month 24, the company is $121,000 underwater. One month later it would have been profitable.
This is not a hypothetical failure mode. When CB Insights analyzed 431 VC-backed startups that shut down since 2023, running out of capital appeared in 70% of the post-mortems. CB Insights itself notes it is almost always the final cause, not the root one. Cash is where every other problem eventually shows up, including the problem of simply being too slow.
Bench Accounting is the starkest recent example. The Vancouver bookkeeping startup had raised US$113 million, employed more than 600 people and served over 12,000 small businesses. On December 27, 2024, it shut down overnight, reportedly after a lender called in its venture debt. Customers, revenue and a brand were not enough once the cash ran short.
→ Hitting your targets answers the question "does this business work?" Runway answers a different one: "will we still be here when the answer arrives?"
2. The 20-Month Gap Is Longer Than It Looks
Your runway doesn't need to last until break-even. It needs to last until the next round. That is where the 20 months come from.
According to Carta, among startups that raised a primary Series A in the second quarter of 2025, the median time since Seed was 616 days, a little more than 20 months, and more than two months longer than two years earlier.
That number is already a problem for our example founders: their true runway is 15.6 months. But it is worse than it looks, for three reasons:
It only counts the winners. Carta's median is calculated over companies that did raise a Series A. Startups that never got there are not in the number, so the real wait for a typical seed company is longer.
The raise itself takes time. Carta estimates three to six months of regular pitching before any money arrives. With 15.6 months of runway, our founders need to start raising between Month 10 and Month 12, not when the bank balance looks worrying.
The bar moved too. Carta reports that investors now expect Series A companies to have roughly $5 million to $10 million in annual recurring revenue, versus under $1 million two or three years earlier. More proof takes more months.
There is good news. In December 2025, Carta's head of insights Peter Walker reported that startups that raised Seed in 2024 were graduating to Series A faster than the 2023 cohort. The trend may be turning. But a plan should never depend on catching the better side of a trend.
Convoy shows what happens when the timing turns against you. The Seattle freight startup was valued at $3.8 billion in 2022. In October 2023 it shut down after a four-month search for a buyer failed, with its CEO pointing to a freight recession and a contraction in the capital markets. The window to raise closed faster than the company could adapt.
→ The question is not whether your cash lasts a year. It is whether it lasts long enough to hit the milestones the next investor will ask for, plus the months it takes to raise.
3. Why Your Runway Is Shorter Than Your Spreadsheet Says
Most founders calculate runway as cash in the bank divided by monthly costs. For our example, that shortcut says 17 months. The true number is 15.6. Three things explain the difference:
It forgets the launch. Our founders spend $60,600 before their first sale (MVP, legal, branding, launch marketing and equipment), or $69,690 with a 15% contingency. That leaves $530,310 to fund operations.
It has no buffer. Fixed costs of $35,350 a month become $38,885 with a 10% buffer. Costs rarely come in below plan.
It ignores revenue. Without any revenue, runway would be 13.6 months. Expected revenue stretches it to 15.6. Gross burn is what you spend; net burn, what you lose after revenue, is what decides runway.
Look at where the money goes, too. People (two founder salaries, one engineer, contractors and payroll taxes) account for 80% of fixed costs. Every other line combined is under $8,000 a month.
That is why Paul Graham, in his essay "Default Alive or Default Dead?", calls hiring too fast by far the biggest killer of startups that raise money. His example: Airbnb waited four months after raising at the end of Y Combinator before hiring its first employee.
→ Always look at two runways: one with the revenue you expect, and one without it. The first is your plan. The second is your downside.
4. How Much to Raise: Work Backwards From 18–24 Months
The useful question is not "how much can we raise?" but "how much do we need to reach the next milestone, with time to spare?" Carta's own guidance is to raise enough for 12 to 24 months of runway. Given a 20-month median gap, the upper half of that range is the safer default.
The formula: launch capital, plus net burn for every month up to your target runway, plus any cash you want left at the end. Then subtract what you already have.
12 months needs $496,500. The $600,000 on hand covers it.
18 months needs $656,900: $56,900 more than they have.
24 months needs $721,400: $121,400 more, exactly the deepest point of the cash curve.
If the gap can't be closed before the next priced round, many founders now bridge it. Carta found that 16.6% of all cash raised on its platform in Q2 2025 came through bridge rounds, up from 11.8% a year earlier, and 22.5% at the Series A stage. A bridge buys time, but it is a plan B, not a strategy.
→ Raise for the milestone plus the fundraise, not for the milestone alone.
5. Five Moves When the Gap Doesn't Close
We ran each move through the same model. The base case: 15.6 months of runway and a $121,000 hole at the lowest point.
Answer the default alive question. Paul Graham's test: assuming expenses stay constant and revenue keeps growing at its recent rate, do you reach profitability on the money you have left? He found that half the founders he talks to don't know. Trevor Blackwell's free calculator (growth.tlb.org) answers it in two minutes; our calculator answers it month by month.
Cut fixed costs early, not late. Reducing fixed costs by $10,000 a month from Month 1 makes our example company default alive: the cash never goes below about $103,000. The same $10,000 saved for only the first six months, such as a hire delayed by half a year, extends runway to 18.2 months.
Pull revenue forward. Starting revenue in Month 3 instead of Month 4 adds about half a month of runway and shrinks the hole from $121,000 to $82,000. Pre-sales, paid pilots and annual prepayments all count.
Know which growth rate you are betting on. At 20% monthly growth instead of 15%, runway reaches 18.5 months and the cash dips only about $1,000 below zero. At 10%, runway falls to 14.9 months and the hole grows to $363,000. Model all three before you promise one to investors.
Put the fundraise on the calendar. Write down the month your raise must start (runway minus six months) and the month you switch to plan B if it isn't working. Graham's advice is to write plan B down precisely, before you need it.
→ If the gap is small, as it is here, you may not need a bigger round at all. One delayed hire or one month of earlier revenue can be worth more than a new investor.
6. Get the Calculator: Your Launch Budget in 15 Minutes
The Startup Launch Budget & Runway Calculator is a free Excel template that turns everything above into your own numbers. It includes seven tabs:
Instructions: quick start, color code and how runway is calculated.
Dashboard: launch capital, gross and net burn, true runway vs the shortcut, break-even month, how much to raise and three charts.
Assumptions: cash on hand, revenue expectations, buffers and your target runway, plus an example on/off switch.
One-Time Launch Costs: legal, product, branding, equipment, inventory and launch marketing.
Monthly Recurring Costs: people, tools, office, baseline marketing, services and support.
Variable Costs: costs that scale with revenue, as a % of revenue.
Monthly Cash Flow: 36 months of revenue, burn and cash balance.
How to use it: set "Use example data?" to No, enter your cash and revenue assumptions, then fill the blue cells on the three cost tabs. The Dashboard updates as you go. Then test the five moves above: change one assumption at a time and watch the break-even month and the cash-out month move.
It is a planning tool, not financial or tax advice. Costs vary widely by country and industry, so review your budget with an accountant.
