Last updated: 5 August 2026.
Quick answer. Burn out and runway are two essential financial metrics for startups. Burn out measures the rate at which a startup spends its money; a high figure indicates that the company is spending more than it generates, often driven by overspending on marketing and sales, research and development, or salaries and benefits. Runway measures how long the startup can continue operating without new investment; a short runway signals that fresh funding will be needed within a limited period. Together, these metrics indicate the financial health of the business, help investors assess the risk of investing and guide founders’ financial decisions. Startups combining a high burn out with a short runway face a materially higher risk of failure, so both should be monitored continuously.
Burn out and runway are two important metrics for startups. Burn out measures the rate at which a startup spends its money, while runway measures how long a startup can continue to operate without new investment.
Burn Out
Burn out is a metric that measures the rate at which a startup spends its money. It is calculated by dividing the startup’s monthly expenses by its monthly revenues.
A high burn out indicates that the startup is spending more money than it is generating. This can be a problem if the startup is unable to increase its revenues or reduce its expenses.
There are a number of factors that can contribute to high burn out, such as:
- Overspending on marketing and sales
- Excessive expenditure on research and development
- Excessive spending on salaries and benefits
Runway
Runway is a metric that measures how long a startup can continue operating without new investments. It is calculated by dividing the startup’s cash flow by the burn out.
A short runway indicates that the startup needs new investments in a short period of time. This can be a problem if the startup cannot find investors willing to invest in it.
There are a number of factors that can contribute to a short runway, including:
- High burn out
- Low cash flow
- An unrealistic revenue forecast
Why they are relevant for startups
Burn out and runway are relevant for startups for several reasons. First, they provide an indication of the financial health of the startup. Second, they help investors assess the risk of investing in the startup. Third, they can help startup founders make decisions on how to manage their finances.
Startups with a high burn out and a short runway are at a higher risk of failure. It is important for startups to monitor these metrics and take steps to reduce burn out and increase runway.
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What is the origin of the expression Runway?
The origin of the term runway can be traced back to aviation. In aviation, the runway is the distance an aircraft needs to stop after landing. This distance depends on the speed of the aircraft, the weight of the aircraft and the runway conditions.
The runway metaphor has been transposed to the business world to describe the time a company has to achieve success before its capital is exhausted. In the case of startups, the runway measures the time the startup has to reach profitability or to be acquired by another company.
The term runway was first used in the context of startups in the 1990s, during the dotcom bubble. At that time, startups were spending huge amounts of money on marketing and development, and investors were willing to fund these companies despite their losses.
Conclusion:
In summary, burnout and runway are two important metrics for startups, and the advice of a financial advisor and M&A and corporate lawyers can be of great help to startups in managing their finances and achieving success.
Some tips for startups to reduce burnout and increase runway:
- Make a detailed budget and review it regularly.
- Be realistic with income and expenditure forecasts.
- Reduce unnecessary expenditure.
- Seek new sources of income.
- Set targets for growth and profitability.
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Frequently asked questions
Burn out is a metric that measures the rate at which a startup spends its money. A high burn out indicates that the company is spending more than it generates, which becomes a problem if it cannot increase its revenues or reduce its expenses. Common causes include overspending on marketing and sales, research and development, or salaries and benefits.
Runway measures how long a startup can continue operating without new investment, and is calculated by relating the startup’s cash position to its burn out. A short runway indicates that the startup will need fresh investment within a short period of time, which becomes critical if it cannot find investors willing to back it.
They matter for three reasons: they provide an indication of the financial health of the startup; they help investors assess the risk of investing in it; and they help founders make decisions on how to manage their finances. Startups with a high burn out and a short runway are at a higher risk of failure.
A short runway is typically driven by a high burn out, low cash flow or an unrealistic revenue forecast. Monitoring these factors allows founders to take corrective measures — reducing expenditure or improving revenues — before the company exhausts its capital and is forced to seek funding under pressure.
The term originates in aviation, where the runway is the distance an aircraft needs to stop after landing, depending on its speed, its weight and the runway conditions. The metaphor was transposed to the business world to describe the time a company has to achieve success before its capital is exhausted.
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Related tool, free to use: the startup legal health check.
