Runway is the number of months your startup can keep operating before it runs out of cash. You calculate it by dividing your current cash balance by your net monthly burn, which is the cash that leaves your bank each month minus the cash you actually collect. Scenario planning means stress-testing that single number against a realistic base case and a harsher downside case, so a bad quarter never catches you off guard. Do this work before you need money, because raising from a position of weakness costs you valuation, control, and sleep.
Start with your two hard numbers
Two figures drive everything. Gross burn is your total monthly cash outflow. Net burn is gross burn minus the cash you collect. Runway in months equals cash in the bank divided by net monthly burn. Use money actually sitting in the account, not accruals, and use collections you have genuinely received, not invoices you have merely raised. If burn changes from month to month, model it forward on a simple spreadsheet instead of assuming one flat figure.
Build the base case
Your base case is the most likely path. Anchor it to the last three months of actuals, not your pitch deck. Grow revenue at a rate you have actually achieved. Include every committed cost: salaries, rent, cloud and software, statutory dues such as GST, TDS, PF and ESI, and professional fees. Add known one-offs like a hiring push or an audit. The output you want is a month-by-month closing cash balance and the exact month it would hit zero.
Build the downside case
The downside case is what happens when several things go wrong at once. Combine revenue coming in 20 to 30 percent below plan, a key customer delaying payment by 60 to 90 days, and your next fundraise slipping by six months. Founders routinely underestimate how long a round takes to close, so deliberately model the raise landing later than you hope. If the downside runs out of cash before you can realistically close a round, that is a problem to fix today, not later.
Pull the levers to extend runway
Runway is not fixed. Before you raise, work these levers in order of speed and cost.
Cut and defer spend
- Freeze non-essential hiring and pause discretionary marketing.
- Convert fixed costs to variable ones and renegotiate vendor payment terms.
- Trim founder cash compensation, which also signals seriousness to investors.
Get cash in faster
- Shorten customer payment terms, invoice on delivery, and ask for advances.
- Chase receivables weekly, because reducing collection days directly lowers net burn.
- Reclaim TDS that customers deduct as an income-tax refund, and claim your GST input tax credit promptly so it does not sit locked up.
Use non-dilutive capital
- If you are DPIIT-recognized and incorporated not more than two years ago, the Startup India Seed Fund Scheme offers up to Rs 20 lakh as a grant for proof of concept, prototype or product trials, and up to Rs 50 lakh for market entry and scaling through convertible debentures or debt instruments.
- If you are approaching profitability, DPIIT-recognized startups incorporated before 1 April 2030 with turnover under Rs 100 crore can elect Section 80-IAC to claim a 100 percent deduction on profits for any three consecutive years within their first ten, preserving cash you would otherwise pay in tax.
Set a cash trigger and a cadence
Update the model on the same day every month against actuals. Decide in advance the runway threshold, commonly 6 to 9 months, at which you either start raising in earnest or cut deeper. Since angel tax was abolished for all classes of investors from 1 April 2024, one old friction on raising has gone, but the discipline of starting early has not changed. A funding round can easily take three to six months, so the founder who plans for the downside is the one who negotiates from strength.