A round should buy enough months to reach your next milestone even if things run late, plus the months it takes to raise again. The usual guidance is 18 to 24 months of runway. That range is right, but the way most founders turn it into a number, today's burn times 18, undersizes the round because it prices the company you have instead of the one the money will build. Below is one seed company sized three ways, so you can see what each number buys.
The shortcut: today's burn times 18
The example is a six-person SaaS company raising a seed round. It has €6,000 of monthly recurring revenue and spends €40,000 a month, so its net burn today is €34,000. The founders' milestone for the next raise is €46,000 of MRR, about €550,000 a year, and they believe they can reach it in 18 months.
Eighteen months at today's burn is €612,000. That number feels safe because it matches the guideline. The problem is that the money will be spent on hires, and every hire raises the burn.
Model the company the money will build
The plan adds four people over two years, most of them in the first year, plus more spending on tools and marketing as revenue grows. Gross burn rises from €40,000 to €68,000 a month. Revenue follows the founders' plan. Figures are monthly averages for each quarter.
| Quarter | Gross burn / month | Revenue / month | Net burn / month | Cash used so far |
|---|---|---|---|---|
| 1 | €40,000 | €6,000 | €34,000 | €102,000 |
| 2 | €50,000 | €10,000 | €40,000 | €222,000 |
| 3 | €56,000 | €16,000 | €40,000 | €342,000 |
| 4 | €60,000 | €24,000 | €36,000 | €450,000 |
| 5 | €62,000 | €34,000 | €28,000 | €534,000 |
| 6 | €64,000 | €46,000 | €18,000 | €588,000 |
If everything goes to plan, the company hits €46,000 of MRR at the end of month 18 having spent €588,000. On the €612,000 round it would have €24,000 left: less than two months of burn, with a fundraise still to run.
Now assume it runs late
Costs are the easy part to predict because you control them. Revenue is not. Run the same costs with revenue arriving six months behind plan:
| Quarter | Gross burn / month | Revenue / month | Net burn / month | Cash used so far |
|---|---|---|---|---|
| 1 | €40,000 | €6,000 | €34,000 | €102,000 |
| 2 | €50,000 | €6,000 | €44,000 | €234,000 |
| 3 | €56,000 | €6,000 | €50,000 | €384,000 |
| 4 | €60,000 | €10,000 | €50,000 | €534,000 |
| 5 | €62,000 | €16,000 | €46,000 | €672,000 |
| 6 | €64,000 | €24,000 | €40,000 | €792,000 |
| 7 | €66,000 | €34,000 | €32,000 | €888,000 |
| 8 | €68,000 | €46,000 | €22,000 | €954,000 |
The milestone now arrives at the end of month 24, and getting there costs €954,000. A six-month slip on the revenue side adds €366,000 to the bill, because the costs arrive on time.
Add the time it takes to raise again
You cannot start the next raise with an empty account. NYU's entrepreneurship team, in The Runway Equation, estimates about six months to raise a round, which is why they recommend 18 to 24 months of runway. So add six months of net burn at the milestone to each case:
round = cash used to reach the milestone + 6 x net burn at the milestone plan case: 588,000 + 6 x 18,000 = 696,000 late case: 954,000 + 6 x 22,000 = 1,086,000
Three round sizes side by side
| Round | If the plan holds | If revenue runs six months late |
|---|---|---|
| €612,000 (today's burn x 18) | Milestone in month 18 with €24,000 left | Out of cash in month 14, before the milestone |
| €700,000 (plan plus time to raise) | Milestone in month 18 with €112,000 left | Out of cash in month 16 |
| €1,100,000 (late case plus time to raise) | Milestone in month 18 with €512,000 left | Milestone in month 24 with €146,000 left |
The €612,000 round only works if nothing slips. The €700,000 round covers the plan and fails in the late case. The €1.1M round covers both, and in the on-plan case the company reaches breakeven around month 24 with money still in the bank, so the next round becomes optional.
Choosing between them is a judgement about how much you trust your revenue plan and how much dilution you accept. The table shows the price of that judgement: about €400,000 of extra funding separates "works if we are on time" from "works if we are six months late".
When investors offer less
If the market will give you €800,000 and your late case needs €1.1M, shrink the plan and leave the six months for raising alone. Hiring timing is the main lever. Each €8,000-a-month hire moved six months later takes €48,000 off the late-case bill, so a €300,000 gap needs about six of those moves, or a nearer milestone that justifies the next round with fewer people.
Raising less and hoping to be on time is how companies end up in what Paul Graham calls the fatal pinch: lots of burn, slow growth and a fundraise that has to work. The same essay says Y Combinator tells founders to act as if each round is the last money they will get.
After the money arrives
The model that sized the round is also your spending plan. Before each planned hire, check actual revenue against the plan and against the late case, and delay the hire if you are tracking the late one. Check your run-out date every month, and ask each quarter whether the company is default alive. The cash runway calculator handles the quick check from three numbers.
In Plainhub, each planned hire can sit on the Plans page as a draft with its start date, next to today's runway, until you commit it. Committed plans only count from their start date, so the runway you see today reflects the team you have now.