What Sequoia Wants Every Founder to Know About Runway
From debt traps to milestone math, here’s the playbook VCs use to assess whether you’ll raise again or run out.
In the early days of your startup, runway feels like a comfort metric—"We’ve got 18 months left, we’re good."
But comfort can be dangerous.
Runway isn’t just a number. It’s a moving target, a financial philosophy, and sometimes the difference between building a generational company or calling it quits too soon.
Let me walk you through a mental model shared by Sequoia Capital—and how you, as a founder, should truly think about your runway in 2025.
What is Runway (Really)?
Most founders think of it as:
Runway = Cash in Bank / Monthly Burn
For example, if you’ve got $10M in the bank and you're burning $500K a month, you have 20 months of runway. Simple?
Not quite.
You need to factor in net cash—your actual cash balance minus any debt you’ve already drawn. Because borrowed money isn’t yours to spend freely. It comes with strings attached: repayment terms, dilution risks, investor signals.
💡 Rule #1: If it’s not equity-funded, don’t count it as part of your runway.
Burn ≠ Net Loss
Another mistake founders make?
They confuse monthly burn with net income. But burn is raw. It’s your real cash out minus real cash in, including all those non-P&L moments—like pre-paying inventory or collecting upfront subscriptions.
So even if your books say you’re profitable, your bank balance might say otherwise.
💡 Rule #2: Always track cash burn. Update it monthly. Religiously.
Now, imagine you're on a highway running low on gas.
The question isn’t "How much gas is in the tank?"
The real question is: "Will I reach the next gas station?"
In startup terms, that next gas station is your valuation milestone. Maybe it’s:
$1M ARR
Positive unit economics
A new product shipped
3 new enterprise logos signed
Whatever it is, that’s what you’re raising money to reach—not just to extend time.
💡 Rule #3: Raise to hit milestones, not just to buy months.
A Mental Framework: Runway vs. Milestone
Here’s the real visual that should guide your decisions:
One curve shows your cash balance over time (burning down).
The other shows your milestones/metrics progressing (ramping up).
Success = The green line (progress) overtakes the black line (burn) before the money runs out.
👉 You don’t need infinite runway. You need just enough to hit the next credible milestone.
Which Bucket Are You In?
According to Sequoia’s framework, there are 3 buckets:
< 12 months of runway
You’re in the danger zone. Make aggressive decisions. Now.12+ months but not enough to raise a strong round
Most founders think they’re safe here—but they’re not. This is the most dangerous illusion.Enough runway to reach or surpass your next funding milestone
Congrats. Stay focused and optimize for efficiency, not just growth.
💡 Rule #4: Be brutally honest about which bucket you’re in.
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So… How Do You Extend Runway?
Here’s the part that sucks—but could save your startup.
Start by breaking down your burn drivers into components:
Gross margin → How much does it cost to serve each customer?
Opex → Salaries, software, marketing, infrastructure
Capital outflows → Inventory, hardware, contract obligations
Then map these costs on two axes:
Impact on burn
Ease of execution
You'll find most high-impact actions are hard to execute. But that's where real change happens.
Delay vendor payments
Pause non-core hiring
Shift customer acquisition to organic channels
Raise prices strategically
Sunset non-performing markets or products
💡 Rule #5: If it’s hard but impactful—prioritize it. Survival > comfort.
How Much Runway Do You Really Need?
Let’s say you want to raise again in 3 years at the same valuation you got last time.
That likely means you need to 10–15x your current metrics.
Now add 12 months of buffer to raise before you run out.
So really, you need 4 years of runway to hit that milestone and raise on your terms.
That’s what smart founders are planning for.
💡 Rule #6: Work backwards from your next fundable milestone. Add a 12-month buffer.
Runway Is Not Just About Surviving
It’s about buying time to build something fundable.
Most founders are in Bucket 2, thinking they’re fine—but they’re quietly burning cash without growing the fundamentals fast enough.
This isn't the 2021 market anymore. Valuations aren't based on vibes.
💡 TLDR:
Runway ≠ Time — it’s a strategic runway to the next milestone
Be realistic. Cut earlier. Grow smarter.
Don’t let the clock outrun your progress
You’ve got what you need.
Just make sure the numbers don’t lie.
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