Startup Advice: Don’t Just Calculate Your Runway. Try to Break It.

If there’s a question that investors always ask, especially of early stage startups, it is ‘what’s your runway’. Which is why most founders put in a lot of work calculating it an preparing nice excels that back their claims.

Yet, here’s a thought: rather than simply calculating your runway, try to break it.

If your financial model says you have 18 months of cash, spend some time working out what would need to happen for that to become 15 months, or even 8. That’s not because you should plan for everything to go wrong, but because things rarely happen exactly as the spreadsheet says they will.

Sales cycles take longer than expected and a customer that was supposed to sign in April signs in July (or not at all). Some costs appear unexpectedly or customers pay later than anticipated. It could be that when you find the right people to add to your team, they costs more than budgeted. Or it could be that the next funding round, which you assumed would take three months to complete, takes six.

Those are all very real situations that I’ve come across multiple times.

On their own, none of them are life-threatening but when two or more strike hen it can be different. Especially when you 18 months’ of runway depend on everything going well.

That’s why it is a good thought exercise that when you calculate runway, you build a downside case as well. Push some revenue back by three months, increase a few costs, assume customers take longer to pay and give yourself more time to raise the next round. Then look at what happens to your cash position and, more importantly, what decisions you would make if that scenario started becoming reality.

From an investor’s perspective, I don’t expect a founder to predict everything that could possibly go wrong. In fact, I would probably be more concerned by a plan that assumes they can.

What gives me greater comfort is seeing that a founder understands which assumptions matter most, has thought about what happens if they prove wrong, and knows where they could react if necessary.