Be transparent and communicate with your investors so they know what’s going on in your business.
Runways, Flight Levels and Your Startup
Planning the runway for your startup is crucial for getting your company where you want it to be.
What's your runway looking like? Do you need enough "runway" or capital to land a Gulfstream or a Piper Cherokee? While one requires a runway of 6,000 ft, the other needs less than 1,000 ft. The runway is a vital metric for early-stage startups.
What distance of runway do you need for your startup?
As a founder in today's market, while maneuvering your new venture you will find yourself questioning the runway for your startup. Even if your company is thriving, securing funding for your next round may prove challenging as your cash reserves dwindle.
Let's look at cash in the bank like the altimeter of a plane. The goal is to keep the aircraft in the air and in a state of controlled flight with capital keeping you at a pleasant cruising altitude. Not enough cash in the bank and you risk descending. Flying too high and bringing on more outside investors means you can soar, but it is necessary for your startup? Each investment round boosts the plane higher. There's an argument for not becoming too dependent on those investment rounds which we'll get to at another time. *Raising too much capital can result in wasted resources and equity.
Running out of money is the second most common reason why startups fail, so it is life or death in keeping an eye on your runway.
Cash runway is a crucial startup metric to follow especially if your company revenue is unstable (or you're just not there yet). It requires an understanding of your cash on hand, monthly expenses, and any revenue.
After you get a handle on that then you can move on over to calculating your cash burn rate (monthly expenses - monthly revenue), and then your cash runway (cash on hand / by cash burn rate).
If keeping your company where you want it isn't hard enough, managing your own psychology can be on its own stressful too. Learning to master your own negative thoughts and anxiety when things get short and the flip side of not being too self-confident when you're soaring is all part of the smooth flight.
Find your wingman or wingwoman and gain insight and advice. Mentors and those connections you've made along the way can help you navigate through it all.
So, you're the pilot. What's your flight plan?