Seed startup runway: how to plan the next fundraising step

Start with the cash fact

Runway is the months left before cash ends. If cash burn stays the same, divide bank cash by net cash burn per month. Net burn is cash out less cash in. It is not profit and loss. [1]

Use cash you can use now. Put aside cash due for pay, tax, debt, and key suppliers. Check this sum each week. Do not count a hoped-for deal as cash. [3]

• Bank cash that you can use.
• Cash due in, with a date and chance of payment.
• Cash due out, with a date and owner.
• Cash floor that triggers a choice.

Build a monthly cash path

A simple sum fails when cash in or costs change. Make a cash plan for each month. List cash in and cash out until cash is gone. This gives a better runway view. [1]

For each key number, write why it is there. Add dates for customer pay, hires, tax, and big bills. Keep the source note by each number. A cash plan helps you choose. It is not a promise.

Use a base case and one hard case. In the hard case, a buyer may pay late, sales may take more time, or a cost may rise. Do not hide the case that hurts most.

• Base case: your best view now.
• Hard case: less cash in or more cash out.
• Action case: the change you will make if the hard case starts.

Turn the round into a funded plan

Say what this cash must pay for. Link each main cost to one next goal. A goal is a dated result you can check. It may be a new release, buyer use, a paid pilot, or a sales test.

The SBA says financial plans should match the funding request. It also asks for clear assumptions and, in year one, monthly or quarterly detail. [2] Use this link in your note to backers.

Write what you have not shown yet. Say how the cash helps test it. A plan is not a result. Do not promise a backer a return.

• Cash asked for and the time it covers.
• Main work paid for by the round.
• Goal, measure, and review date.
• Risk that may change the plan.

Set actions before the cash floor

Work back from your cash floor. Give each raise step an owner and a date. Steps may be backer research, a short update, first calls, follow-up, and legal checks. Keep building and selling as you run the process.

No one safe runway fits all seed firms. Sales time, market, round size, team load, and backer process can change. Use your own cash plan to set the start point. Check it often.

Name a choice for each case. You may pause a hire, change spend, seek buyer cash, or change the ask. Act while choices remain.

• Cash floor and the choice it triggers.
• Fundraising task, owner, and due date.
• Weekly cash and sales-pipe check.
• Clear next step after each backer call.

Treat short runway as an operating issue

When runway is short, look at sales and costs at once. YC says founders should act to keep the firm going, not expect new cash to arrive. [3]

Do not keep a cost because a backer may pay for it later. Do not wait for a weak sign. Talk early to your board, accountant, and good local advisers when pay, tax, debt, or insolvency risk may apply.

For a U.S. offer that uses Regulation D, the SEC says Form D is due within 15 days after the first sale. This is not a rule for when to raise. Get legal advice for the offer and place. [4]

• Cut or delay spend with a weak link to the next goal.
• Protect pay, tax, debt, and other due bills.
• Write down plan changes and why they happened.
• Get local legal and finance advice when needed.