Gross burn is total cash operating spend in a period. Net burn subtracts cash collected from customers in that same period. Runway is cash in the bank divided by net burn when net burn is positive. These definitions and formulas are canonical in the burn rate and runway guide; below is the same numeric example in spreadsheet form.

Worked example

• Cash in bank: $600,000
• Monthly operating spend (payroll, tools, rent, ads): $120,000 → gross burn
• Customer collections this month: $45,000
• Net burn = $120,000 − $45,000 = $75,000
• Runway ≈ $600,000 ÷ $75,000 = 8 months

If net burn is zero or negative, classic months-of-runway math matters less—track cash buffer and planned growth spend instead.

Why gross and net both matter

Gross burn answers how expensive the operation is. Net burn answers how fast the bank balance falls when revenue helps offset spend. Using gross burn for runway while you have meaningful collections overstates how long you can operate.

Fundraising timing

Many teams start serious raise conversations when runway approaches roughly 9–12 months—earlier if their process is slow. Work backward from your minimum comfortable runway to the date you must start outreach. See how to find investors and the SaaS metrics fundraising checklist.

Common mistakes

• One unusually light month instead of a three-month average.
• Counting committed but uncalled venture cash as runway.
• Ignoring a planned hire or marketing ramp that raises burn next quarter.

Source context: Y Combinator — Default Alive or Default Dead?