What Founders Misunderstand About “Runway” — And Why It’s Dangerous?
“Runway” is one of the most used—and most misunderstood—terms in startup finance. Founders refer to it constantly when speaking to investors, teams, and board members. But most of them calculate it wrong. A misleading runway number does more than create false confidence. It leads to hiring you can’t afford, fundraising that comes too late, and burn rates that catch you off guard. Here’s where founders get it wrong—and what a virtual CFO would do instead. 1. Most Founders Use a Static Runway Formula The mistake: Founders typically use a simple formula: Runway = Cash in Bank ÷ Monthly Burn While this gives a quick snapshot, it assumes the burn rate is fixed and linear. That is rarely the case in real-world operations. Example: A startup has ₹1.2 crore in the bank and a monthly burn of ₹10 lakh. Using the formula, they assume 12 months of runway. But: Burn is expected to increase to ₹14–15 lakh within 3 months due to hiring and marketing ramp One-time payments like tax dues and l...