Definition
Burn rate and runway are the two most important cash metrics for any startup. Gross burn is total monthly expenses; net burn subtracts revenue. GitDealFlow's engineering signals can indicate whether a startup is investing in growth or conserving cash.
How it works in practice
Burn rate is how fast a startup spends cash. Gross burn is total monthly operating expenses; net burn subtracts revenue from expenses and is the number that actually determines survival, a company with $300K of monthly expenses and $200K of revenue burns $100K net, not $300K. Investors and founders track both, but runway math runs on net burn.
Runway is cash on hand divided by net burn: $2.4M in the bank at a $100K net burn is 24 months of runway. The rule of thumb in fundraising is to raise well before runway runs low, starting a 3-6 month process with only a few months left puts the company at a severe negotiating disadvantage. Burn is also a strategic dial: companies deliberately burn more to grow faster, and the question investors ask is whether the spending is buying durable growth.
Burn is private data, but its trajectory is often visible indirectly. GitDealFlow reads the public GitHub activity of 350+ startups, tracking commit velocity, contributor growth, and repository expansion, hiring and product investment show up in engineering output weeks before they show up in financials. Rising burn with rising velocity is investment; rising burn with a stalling repo is a warning.
Key points
- Gross burn = monthly expenses; net burn = expenses minus revenue; runway runs on net burn.
- Runway = cash divided by net burn; raise before it gets short.
- Burn is a strategic dial: spend should buy durable growth.
- Investors judge burn against output, velocity, retention, and revenue.
- Hiring and investment show up in public engineering data first.
Frequently Asked Questions
What's a normal burn rate?
Pre-seed: $20-50K/month. Seed: $50-150K/month. Series A: $150-500K/month. Gross burn varies significantly by sector.
What's the difference between gross and net burn?
Gross burn = total monthly expenses. Net burn = gross burn minus monthly revenue. Net burn matters more because it determines actual runway.
How does burn rate affect fundraising?
High burn with strong growth signals (rising engineering velocity per GitDealFlow) is defensible. High burn with decelerating momentum is a crisis.
How do you calculate runway?
Divide cash on hand by net monthly burn. If the company has $1.8M in cash and burns $150K net per month, runway is 12 months. Recalculate monthly, both cash and burn move, and model scenarios (hiring plans, revenue growth) rather than a single static number.
What's the difference between burn rate and runway?
Burn rate is a speed: how much cash the company spends per month. Runway is a duration: how many months the company can operate before the cash runs out, computed as cash on hand divided by net burn. Investors ask about both, the rate tells them how aggressive the strategy is, and the runway tells them how much time remains.
What happens when a startup runs out of runway?
Without new capital, the company must cut costs to reach breakeven, sell, or shut down. In practice, founders usually see the runway problem coming and either extend it with spending cuts or raise, but raising from a weak position (little runway, weak momentum) produces the worst terms. The discipline is to treat runway as a planning tool, not a crisis timer.