What Is SaaS Burn Rate & Runway?
Burn rate measures how fast your startup consumes cash. Gross burn is total monthly expenses (salaries, hosting, marketing, rent). Net burn subtracts your monthly recurring revenue (MRR) from gross burn — this is the true speed at which your bank balance shrinks.
Runway is the time remaining before cash hits zero. A flat runway assumes MRR and expenses stay constant. A growth-adjusted runway models MRR compounding month over month, which reduces net burn over time and often extends survival by months or years.
In 2026, AI-native SaaS startups face additional variable costs from LLM APIs (OpenAI, Anthropic, DeepSeek). These scale with usage, making burn rate monitoring even more critical than traditional infrastructure costs.
Default Alive vs Default Dead
Coined by Paul Graham, these terms describe your startup's trajectory without external intervention:
- Default Alive — Your current revenue growth and expense trajectory will lead to profitability before you run out of cash. No fundraising required.
- Default Dead — You will run out of money before reaching profitability unless you raise funding, cut costs, or accelerate revenue dramatically.
The crossover point is your break-even MRR. When monthly revenue equals monthly expenses, net burn becomes zero and runway becomes infinite. Use the hiring model above to see how new headcount pushes that break-even point further into the future — the "Race to Break-Even" chart shows exactly where the two lines cross.