What is the difference between Gross Burn and Net Burn?

Gross Burn is the total amount of money your company spends each month on operating expenses. Net Burn is the amount of money you lose each month after accounting for revenue.

What is a good runway for a startup?

Most investors recommend maintaining a runway of 12 to 18 months. This provides enough buffer to achieve key milestones and raise your next round of funding.

Burn Rate & Runway Calculator | Startup Financial Health Tool

Name: Startup Burn Rate Calculator
Author: Traksource

The Formula: How to Calculate Runway

While the concept is simple, understanding the math is vital. Venture Capitalists (VCs) use a specific formula to determine your "death date"—the exact moment your startup runs out of liquid capital.

Runway Formula:
Current Cash Balance / Net Monthly Burn

For example, if you have $150,000 in the bank and you are losing $10,000 a month, your runway is exactly 15 months. This is your "death date"—the date you must become profitable or raise more money.

Gross Burn vs. Net Burn: What's the Difference?

One of the most common mistakes founders make is confusing Gross Burn with Net Burn. To calculate your runway accurately, you generally use Net Burn.

Metric	Definition
Gross Burn	Total cash spent on expenses monthly (Salaries, Rent, Servers).
Net Burn	Cash lost after revenue is counted (Gross Burn - Revenue).

Interpreting Your Results: The "Danger Zones"

Once you plug your numbers into the Traksource calculator, you'll fall into one of three zones. Here is how investors view your financial health:

🔴 The Red Zone (0-6 Months) Status: Critical. You do not have enough time to close a typical venture capital round. Immediate cost-cutting is required.

🟡 The Yellow Zone (6-12 Months) Status: Urgent. You have breathing room, but you should be preparing your pitch deck and data room now.

🟢 The Green Zone (18+ Months) Status: Healthy. This is the ideal state. It allows you to survive market downturns and experiment with product-market fit without panic.

Frequently Asked Questions

Does burn rate include one-time expenses?

Technically, burn rate focuses on recurring operational expenses (OpEx). However, for an accurate runway calculation, you should average out large one-time annual expenses (like server prepayments or legal fees) to ensure you don't run out of cash unexpectedly.

What is a good burn multiple?

The "Burn Multiple" is a metric popularized by David Sacks. It measures how much you burn to generate each new dollar of ARR. A burn multiple under 1.5x is considered efficient, while anything over 3.0x suggests you are burning cash too fast for the growth you are achieving.