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How is runway in months calculated for a startup?

How is runway in months calculated for a startup?
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Generally speaking, runway is measured as how long the company can operate without a cash infusion at a steady state or with growth. If the startup can only last two weeks without a cash infusion, then their runway is two weeks. With respect to waiting until someone pays a bill “in a month,” there is a lot of unknowns. This would need to be diligenced before accepting as a fact. Many customers pay late. Not everyone renews licenses, etc. You may need to bridge the company to the revenues with some padding. If 100% of the customers paid on time and the full amount, what would their runway be? What would rehearsal runway be if 50% paid? Generally, when you bridge a company you take special offerings, like warrant coverage, and you may do it in a less friendly vehicle, like convertible debt. It can also be done at the last round valuation. Proceed with caution, as a bridge to nowhere becomes piers, and this has happens quite a bit. You need to make a bridge with real conviction.
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The Taylor Davidson Runway Budgeting Tool can help plan.
As an investor, you're looking for this investment to bring the company to a significant milestone where next round investors will be motivated to invest. Investment usually takes longer than planned, so having next-round conversations earlier and lining up those investors is a key value of pre-seed/seed stage VCs.

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