Rising monthly burn can shorten runway far below cash divided by today's burn

Dividing available cash by one month's net burn answers how long that cash would last if the same amount were consumed every month. If planned burn rises, the ratio can provide a materially later exhaustion date than the forward cash schedule.

Paul Graham's discussion of whether a startup is default alive or default dead frames the broader question around whether its current trajectory reaches profitability before cash runs out. His illustrative framing assumes constant expenses and continuing revenue growth. The model below asks a different, explicit question: what happens if net cash consumption itself grows each month?

Use a growing-burn model as a transparent scenario, not as a substitute for the underlying operating plan. Payroll, collections and supplier commitments usually have their own dates. The simplified curve is useful for seeing how strongly the headline runway depends on the continuation assumption.

Assume an invented business has $300,000 of available cash and expects $20,000 of net cash use in the next month. Net burn then increases by 10% each month. No new financing or other cash movements are included, and the example initially tests a zero ending-cash threshold.

The first three monthly outflows are $20,000, $22,000 and $24,200. Month n consumes $20,000 multiplied by 1.1 raised to n minus one. The exponent begins at zero because the first forecast month is already specified as $20,000.

A static calculation gives fifteen months: $300,000 divided by $20,000. That calculation is internally consistent with flat burn, but it does not represent the stated 10% monthly increase. The disagreement comes from the future spending path, not from a different starting cash balance.

After six months, cumulative modeled cash use is $154,312.20, leaving $145,687.80. After nine months, cumulative use is $271,589.54, leaving $28,410.46. The tenth month requires approximately $47,158.95.

Without another cash source or a change in the plan, the business cannot fund that entire tenth-month requirement. The end-of-month model reaches negative $18,748.49 in month ten. Its first unfunded month is therefore month ten, well before the fifteenth month implied by flat burn.

The negative balance is a signal that the modeled payments cannot all occur as assumed. It is not an operationally available overdraft unless a valid facility actually permits it. Identify the cash action required before those payments fall due.

For a first-period burn B, constant growth rate g and n whole periods, cumulative burn is B multiplied by ((1 + g) raised to n minus one), divided by g, when g is nonzero. With zero growth, the expression becomes simply B times n.

The formula checks the monthly schedule but does not replace it. Solving for a fractional n extends the mathematical curve between integer months. That fractional result does not establish the day on which payroll, rent or a supplier invoice empties the bank account.

Use the actual payment calendar to locate the shortfall within month ten. If most spending occurs early in that month, the remaining $28,410.46 may last less time than a uniform daily-burn interpolation suggests. Collections arriving later in the month create another timing dependency.

Suppose management requires at least $50,000 of available cash to continue operating normally. Only $250,000 of the starting balance can then be consumed before that threshold is crossed. Under the same growing-burn scenario, month nine ends below the buffer.

The buffer does not reduce the bank balance today. It defines an action threshold within the forecast. Keep it separate from restricted or unavailable cash that should already have been excluded from the starting $300,000.

Report both the first buffer breach and the first modeled inability to fund payments where relevant. A financing or cost decision often needs to begin before either date, with its own preparation, approval and implementation lead time.

Net burn is the difference between cash outflows and operating receipts under a stated definition. A 10% increase in net burn is not the same as a 10% increase in payroll or gross spending. Small changes in two large cash flows can produce a much larger percentage change in their difference.

Build the underlying receipt and payment paths when they are available. A sales ramp may eventually reduce net burn, while a sequence of hires can create steps instead of smooth compounding. An annual renewal can create a spike that the geometric curve misses entirely.

Be especially careful when net burn approaches zero or becomes cash generation. Repeating a percentage growth rule across a sign change can lose its intended meaning. Model the underlying cash flows rather than trying to preserve one percentage through fundamentally different operating conditions.

A useful response scenario identifies what spending or collection changes and when. Freezing burn after month three, delaying a hire and reducing a supplier commitment are different actions with different effects on delivery and cash. They should not all appear as an unexplained lower growth rate.

Keep financing scenarios dated and conditional on their actual status. A possible investment arriving after the first unfunded payment does not solve that earlier gap. Include any fees or conditions that affect the net cash available when the financing closes.

Compare each response with the same starting balance and baseline assumptions. That makes the added operating time attributable to the action visible, rather than mixing it with a simultaneous optimistic change in revenue collections.

At the next review, reconcile actual cash use and identify whether the change came from spending, collections or timing. Replace completed months with actuals and reassess the future growth assumption.

The central result is concrete: $300,000 divided by a $20,000 first-month burn suggests fifteen flat-burn months, while the stated 10% monthly growth path first becomes unfunded in month ten. Showing the path gives management a decision window that the single ratio would otherwise conceal.