How much runway does a hardware startup actually have?

Runway is the date a cash forecast crosses an unacceptable minimum, under stated assumptions. Cash divided by monthly burn is a useful first reading, but hardware decisions also require customer payment dates, production spend, inventory, and supplier terms.

Four readings, one company

Chapter 6 presents four runway readings for one illustrative company, progressively adding signed orders, receivables, and a probability-weighted pipeline with payment terms. The lesson is the spread between scenarios, not a precise survival date. Paul Graham’s default-alive test asks the related question: do existing resources and the current trajectory get the company to profitability?

Separate contracted collections from hoped-for sales. A customer signing a contract is not the same as money arriving, and a pipeline probability does not make a missed payment less expensive.

Worked example: the cash trough matters

Illustrative assumptions. With $300,000 cash and $50,000 monthly net burn, a flat calculation gives six months. A $100,000 receipt in month three seems to add two months, assuming no change in costs. But if delivering that order needs $120,000 of extra production cash in month two, the receipt cannot be counted by itself.

Under these assumptions, month two ends with $80,000: $300,000 − $100,000 of ordinary burn − $120,000 production spend. Month three ends at $130,000 after another $50,000 burn and the $100,000 receipt. A delayed receipt or cost overrun changes that low point. Use weekly intervals around the tightest dates.

Keep three versions current

Maintain a contracted base case, a downside with delayed collections and delivery costs, and an upside that labels uncontracted opportunities. State the minimum cash reserve and the date a financing decision must be made. Update actual collections and spending before relying on the forecast again.

This page is an original summary of an argument developed in Speedstrap, not an extract from the book.

From Chapter 6 of Speedstrap. Find the book on Amazon.

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