Last Updated on
January 28, 2025
By
Excedr
For startup founders and business owners, managing finances is a constant balancing act. One of the most critical metrics to keep an eye on is your cash runway—the amount of time your business can operate before running out of cash. Whether you’re a biotech startup conducting groundbreaking research or a life sciences company scaling operations, understanding your cash runway is essential for making informed decisions and ensuring long-term success.
In this article, we’ll break down everything you need to know about cash runway, including:
By the end, you’ll have a clear understanding of how to manage your cash reserves effectively and position your startup for growth. Let’s dive in!
Simply put, cash runway is the amount of time your business can continue operating before it runs out of cash. It’s a financial metric that reflects how long your current cash reserves will last, given your monthly expenses and revenue.
For startups, especially in industries like biotech and life sciences, cash runway is a lifeline. It provides clarity on how much time you have to achieve profitability, secure additional funding, or adjust your strategy.
Think of it like this: If your startup has $500,000 in cash reserves and spends $50,000 per month (your net burn rate), your cash runway is 10 months. This means you have 10 months to either become cash flow positive or raise more funds before your cash runs out.
To calculate your cash runway, you first need to determine your burn rate—specifically, your net burn rate, which accounts for cash outflows minus inflows.
There are two types of burn rates:
The formula to calculate burn rate is:
Burn Rate = (Starting Cash Balance – Ending Cash Balance) / Number of Months
Once you know your burn rate, use this formula to calculate your cash runway:
Cash Runway = Cash Balance / Burn Rate
Let’s say your business has $500,000 in cash reserves and a net burn rate of $50,000 per month:
In this scenario, you have 10 months of cash runway before running out of funds.
For early-stage startups, cash runway is more than just a financial metric—it’s a survival tool. Many startups fail not because of a lack of innovation but because they run out of cash. By understanding and prioritizing your runway, you can position your business for long-term success while avoiding common pitfalls. Here’s why cash runway matters:
A clear understanding of your runway helps you manage cash flow effectively and avoid unnecessary expenses. It highlights when and where to cut costs, ensuring your business operates efficiently.
Knowing your runway allows you to time fundraising rounds strategically. Without this insight, you risk raising funds too late—leading to rushed decisions—or too early, which may dilute equity unnecessarily.
Cash runway enables you to make informed decisions about cost-cutting, revenue generation, hiring, and expansion. By tracking your runway regularly, you can act proactively instead of reacting to financial crises.
Markets shift, industries evolve, and revenue streams can be unpredictable. A healthy runway provides the flexibility to weather downturns, adjust strategies, and allocate resources toward sustainable growth.
Your runway determines whether your business is:
By knowing where you stand, you can make proactive, informed decisions about how to secure your business’s future.
In short, cash runway is a lifeline. It gives you the clarity, flexibility, and time you need to navigate the challenges of startup life while keeping your long-term goals in focus.
There’s no one-size-fits-all answer to what constitutes a “good” cash runway—it varies depending on your business model, growth stage, and industry. However, there are general guidelines that many startups follow to ensure financial stability:
A cash runway of 12 to 18 months is often recommended for early-stage startups. This buffer gives you time to reach key milestones, adjust to unexpected changes, and secure additional funding without rushing.
For startups in their growth phase, a shorter runway (6 to 12 months) might be acceptable if you’re actively scaling. However, this approach requires careful financial management and reliable revenue generation.
In industries like biotech and life sciences, where product development timelines are longer, a runway closer to 18–24 months is often ideal. This ensures you have enough time to complete R&D, navigate regulatory hurdles, and secure partnerships or funding.
While a longer runway offers more security, it’s not always better. If you’re overly focused on conserving cash, you may miss opportunities to invest in growth. The key is to strike a balance between extending your runway and fueling business development.
If your runway is shorter than you’d like, don’t panic—there are several ways to extend it. Here are some proven strategies for startups:
Boosting revenue is one of the most effective ways to extend your runway. Consider:
Streamlining your financial operations can make a big difference:
Reducing costs is a straightforward way to extend your runway. Focus on:
Start preparing for your next funding round well before your runway runs out. Show investors that you’re hitting milestones, managing cash wisely, and have a clear strategy for growth. Early preparation improves your chances of securing the funds you need.
If traditional venture capital isn’t an option, consider alternatives such as:
Opting to lease instead of buy equipment is a smart way to stretch your cash runway. Leasing offers:
Understanding and managing your cash runway is critical for the success of any startup. It’s more than just a number—it’s your financial roadmap, showing how long your business can operate before requiring additional funding. Whether you’re an early-stage biotech startup or a growing life sciences company, a healthy runway provides the clarity and flexibility needed to avoid overspending, plan strategically, and focus on growth.
By calculating your runway using your burn rate, keeping expenses under control, and exploring smart financing options like equipment leasing, you can extend your runway and strengthen your company’s financial resilience.
To calculate your cash runway, divide your total cash reserves by your monthly burn rate:
Cash Runway = Cash Balance ÷ Burn Rate
For example, if you have $500,000 in cash and a monthly burn rate of $50,000, your runway is 10 months.
The ideal runway depends on your industry and growth stage, but 12 to 18 months is generally recommended for early-stage startups. For biotech and life sciences companies, a longer runway of 18 to 24 months may be more appropriate due to extended R&D timelines.
Leasing reduces upfront costs and spreads payments over time, allowing you to conserve cash for other priorities like R&D, hiring, or scaling operations. It also offers flexibility to upgrade or replace equipment as your business grows.
A startup is considered default alive if it can achieve cash flow positivity with its current resources and operations. This means the business doesn’t rely on external funding to survive.
At Excedr, we understand how important cash runway is for startups in the biotech and life sciences industries. That’s why we offer flexible lab equipment leasing solutions designed to help you conserve cash and focus on what matters most—growing your business. Here's how Excedr's leasing program can get you the equipment you need while extending your runway:
Looking for a smarter way to equip your lab? Excedr can help.
