TL;DR
Runway is the number of months your startup can keep operating at its current spending rate before the bank account hits zero.
What runway means
Runway is calculated by dividing cash on hand by monthly burn rate. It extends in one of three ways: raising more money, cutting spend, or growing revenue enough to reduce net burn. It's the single most-watched number for any founder managing cash, because it tells you exactly how much time you have to hit the next milestone before you need to fundraise again or run out entirely.
Runway isn't a static number either. It should be recalculated regularly as spend and revenue change, and stress-tested against scenarios where a planned raise takes longer than expected, since fundraising timelines rarely match a founder's optimistic estimate.
Why it matters for African founders
With FX volatility affecting several African markets, naira devaluation being a well-documented example, founders holding cash in local currency while paying for cloud infrastructure or software subscriptions in dollars can see their real runway shrink faster than a simple burn-rate calculation suggests. Recalculating runway in the currency your major costs are actually denominated in, not just the currency you raised in, gives a more honest picture.
Common mistakes founders make with runway
- Calculating runway off gross burn instead of net burn, ignoring revenue that's already coming in
- Not stress-testing runway against a currency devaluation scenario when major costs are dollar-denominated
- Treating a signed term sheet as cash in the bank before the round has actually closed and wired
- Waiting until under three months of runway remains to start fundraising, when the process alone often takes longer than that