Cash Runway

What it is

How long the money lasts. Your mentee enters cash, costs and growth, and sees how many months the money lasts.

When to send it

Send it before a big cost. It helps most while there is still time to change course.

• Before a new hireevery new cost moves the date
• Before raising moneyto know how long there is
• When growth changestry the new rate

Filling it in

Ten minutes, in two steps. Enter your monthly figures, then choose what you will do.

1. Enter five numbersCash, monthly costs, revenue and both growth rates.
2. Read the chartIt shows your cash month by month, and when it runs out.
3. Choose a planCut costs, grow faster, raise money or a mix, with a date.

Reading the answers

Read the date, then the rates. The month the line drops below zero matters more than the starting cash.

• Cash lastsmonths until the balance goes below zero
• Outlookdoes revenue overtake costs before that month?
• The plan they chosecut, grow, raise or a mix; ask why

Questions to ask

Ask about the guesses first. Each rate is a guess, so ask where it comes from before you talk plans.

• Which assumption moves the answer most?then: how sure are you of it?
• What would you do if growth halved?then: try it and read the new date
• When do you need to decide about raising money?then: how long would raising take?

Why it works

Paul Graham’s question: with costs and growth as they are now, do you reach profit before the money runs out? Knowing early leaves time to act.

Sources

• Paul Graham (2015). Default alive or default dead?

How a tool works on Mentornity

1. 1The mentor picks a tool from the library and sends it with a short message.
2. 2The mentee fills it in step by step; the answers are saved as they go.
3. 3Both see the answers, comment on any part and agree the next steps.
4. 4Only the two of them see the answers, not the program admins.

Guides for both sides

• Cash Runway for MentorsFor mentors and coaches: when to send Cash Runway, how to read the date the money runs out, which questions to ask and how to agree a plan.
• Cash Runway for MenteesFor mentees and founders: what Cash Runway shows, how to fill it in, where to find it and what your mentor does with it.

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