What is runway in venture capital?

Burn rate is the amount by which spending exceeds income each month. Runway assumes that burn stays the same, so hiring or a fall in revenue shortens it even though the bank balance has not changed. Investors read it alongside the time a company usually needs to raise its next round.

Say a startup has $12 million and spends $1 million a month more than it earns. It has 12 months of runway; if burn doubles, it has six.

It sets when the next round has to happen, and a short one can force a raise at a lower price.