Use our free burn rate calculator to find your runway, then read on, because the math is just the start.
Every founder has that moment. It's 2am, you're staring at a spreadsheet, and you're asking the question that actually matters: How long do we have?
That's what burn rate tells you. It's not just some abstract finance concept, but the actual number of months between right now and "we can't make payroll."
This guide will walk you through how to calculate your burn rate, what investors expect from you when it comes to burning cash, and the warning signs your burning through too much cash, too quickly.
Calculate Your Burn Rate
Use our free burn rate calculator. Just enter your balance, revenue, and monthly expenses to see how long your runway will last.
Gross burn rate = Total monthly expenses (everything going out the door)
Net burn rate = Monthly expenses minus monthly revenue (your actual cash loss)
If you're pre-revenue, they're the same number. If you're making money, net burn is what matters fro runway.
A startup with $500K in the bank burning $50K/month has 10 months of runway. Simple math but existential implications.
What "Good" Burn Rate Looks Like in 2026
Burn rates vary wildly by stage. Here's what the data shows heading into 2026:
Pre-seed: $10K-$25K/month (2-3 people, probably underpaying yourselves)
Seed: $50K-$100K/month (median around $75K according to Brex's data)
Series A: $200K-$500K/month (median ~$250K, team of 15-20)
AI startups: Higher burn is tolerated, but 90% of AI startups still fail—many burning through cash before finding product-market fit.
The more important metric is burn multiple. Burn multiple is how much you're spending to generate each dollar of new ARR. 2025 benchmarks from CFO Advisors show investor expectations have tightened:
- Below 1x: Excellent (AI-native companies are hitting this)
- 1-1.5x: Great (the new target for Series A)
- 1.5-2x: Acceptable
- Above 2x: You'll have trouble raising
The best AI-native startups are achieving sub-1.0x burn multiples. This burn rate is something traditional SaaS companies find nearly impossible. Midjourney generates $200 million annually with just 11 employees. That's the new efficiency bar investors are measuring you against.
Default Alive or Default Dead?
Y Combinator's Paul Graham wrote the definitive essay on this in 2015, and it's more relevant now than ever.
Default alive: If expenses stay constant and revenue keeps growing at its current rate, you'll hit profitability before running out of cash. You control your destiny.
Default dead: You need outside funding to survive. You're dependent on people who may or may not write you a check.
Graham's example: Two startups have identical metrics: $10K monthly expenses, $2.5K monthly revenue, $70K cash. One growing at 10% monthly, one at only 9%.
The 10% company reaches profitability in 1.2 years, burning $68K. Default alive.
The 9% company needs 1.3 years and $75K to get there. With only $70K in the bank? Default dead.
One percentage point. Life or death.
The uncomfortable truth: Graham says half the founders he talks to don't know which category they're in. Don't be one of them.
Why This Matters More Right Now
The funding environment is recovering, but the rules have permanently changed:
- Global VC investment rose to $120 billion in Q3 2025, showing growth for the first time in three years
- But capital is concentrating: AI captured nearly 50% of all global funding in 2025, up from 34% in 2024
- The median gap between funding rounds stretched to 696 days (almost two years) as of Q2 2025
- Only 0.05% of startups successfully raise VC funding, about 1 in 2,000
The old rule was 12-18 months of runway. The new rule is 24-30 months minimum. Most seed-stage companies now target this longer buffer because fundraising cycles have lengthened significantly in uncertain markets.
The Warning Signs That Predict Cash Crises
The statistics haven't gotten any better: 29% of startups still fail because they simply run out of cash. Another 74% fail due to premature scaling, which is just a fancy way of saying they burned too fast.
The 90% overall failure rate persists in 2025, despite better access to capital and AI tools than ever before. First-time founders have just an 18% success rate.
Red flags to watch:
- Burn multiple above 2x (spending $2+ for every $1 of new revenue)
- Runway under 12 months without active fundraising
- Gross burn growing faster than revenue
- High customer concentration (if one customer churns, you're toast)
How to Actually Reduce Burn
The advice isn't complicated, but the execution can be hard.
1. Know your numbers weekly. Not monthly. Understand your cash balance, burn rate, runway at the start of each week. It will save you from surprises down the road.
2. Hire slower than you think you should. Not to quote Paul Graham again, but he famously said, "Hiring too fast is by far the biggest killer of startups that raise money." Airbnb waited four months after their YC raise before making their first hire.
3. Cut the perks that don't matter. Fancy office? Premium subscriptions? Catered lunches? Fun, but they won't save you when the runway gets short.
4. Renegotiate everything. Vendors expect it. Your landlord would rather renegotiate than find a new tenant. Your software providers would rather discount than churn you. Use this to your advantage.
5. Get to default alive. Make the hard choices now while you still have options.
The Bottom Line
The 2026 investor mindset can be summed up in three words: "back to fundamentals." Capital efficiency, profitability, and clear unit economics are now table stakes, while cash-burn and pure user growth metrics face heavy skepticism.
Your burn rate isn't just a number, it's effectively a countdown. The founders who survive are the ones who know exactly how much time they have and make every month (and dollar) count.
Use the calculator and face the math. Then do something about it.
While you're optimizing burn, make sure you're not wasting time on payroll compliance. Multi-state payroll is one of those hidden money pits that catches founders off guard. Warp handles it automatically so you can focus on the stuff that actually moves the needle.
Try the Runway Calculator now
FAQ
What's a healthy burn rate for a seed-stage startup? Most seed-stage startups burn $50K-$100K monthly, with a median around $75K. But "healthy" depends on your runway, aim for 24-30 months of cash given the extended fundraising timelines in 2025-2026.
How do I calculate runway? Divide your current cash balance by your monthly net burn rate. $500K in the bank with $50K net burn = 10 months of runway.
What's the difference between gross and net burn rate? Gross burn is total monthly spending. Net burn subtracts your revenue. If you spend $100K and make $30K, gross burn is $100K and net burn is $70K.
When should I start fundraising based on my runway? Begin raising with 9-12 months of runway remaining. Never let runway drop below 6 months during an active raise. With the median time between rounds now at nearly 700 days, start earlier than you think.
What's a burn multiple and why does it matter? Burn multiple = Net Burn ÷ Net New ARR. It shows how efficiently you're converting spending into revenue. In 2026, below 1.5x is the new target for Series A; above 2x will make fundraising difficult.
This calculator is for informational purposes only. Consult with a financial advisor for guidance specific to your situation.
