Startup Finance Glossary for Founders

Definitions first. Context second. Cross-linked to the calculator so you can see each term in action.

Burn rate

Burn rate is how much cash your startup spends each month.

It's the single most important operational number at an early-stage startup. Burn rate splits into two flavors — gross and net — and most founder confusion stems from using one when they should be using the other. When a VC asks "what's your burn?" they almost always mean net burn.

Gross burn

Gross burn is total monthly operating expenses, ignoring revenue.

Salaries, rent, software subscriptions, contractors, hosting, legal retainers — add them all up. Gross burn tells you the size of your operating base. It's the number that matters if revenue could go to zero (e.g., a single-customer concentration risk) or if you're modeling a worst-case downside.

Net burn

Net burn is monthly expenses minus monthly revenue — the number that actually depletes cash.

If you spend $100k/mo and bring in $20k/mo, net burn is $80k. This is the figure you divide cash by to get runway. If revenue exceeds expenses, net burn is negative — congratulations, you're profitable and runway is infinite (until something changes).

Runway

Runway is months of cash remaining at current net burn.

Runway = cash ÷ net burn. With $1.5M in the bank and $75k/mo net burn, you have 20 months. Runway is dynamic: it shortens when you hire, lengthens when revenue grows or you cut expenses. Most seed-stage investors expect 18–24 months of runway immediately after a round closes.

Default alive

Default alive describes a startup that, on its current growth and expense trajectory, will reach breakeven before cash runs out.

The term comes from Paul Graham's 2015 essay Default Alive or Default Dead?. The test is simple: if you froze hiring today and revenue kept growing at its current rate, would you make it to profitability before the bank account hits zero? If yes, you're default alive. If no, you're default dead — and you need to either grow faster, cut spending, or raise more.

Default dead

Default dead describes a startup that will run out of cash before reaching breakeven on its current trajectory.

Default dead isn't necessarily fatal — it just means the current plan ends in failure, so something must change. Options: raise more, grow faster, or cut expenses (usually some combination). The point of the framing is forcing founders to confront whether existing assumptions actually lead to survival.

MoM growth

Month-over-month (MoM) growth is the percentage change in revenue from one month to the next. It compounds.

At 10% MoM growth, $10k in January becomes $11k in February, $12.1k in March, and so on — roughly tripling in a year (1.10^12 ≈ 3.14). Early-stage SaaS startups often target 10–20% MoM during the first year of revenue. Once you're past $1M ARR, sustaining double-digit MoM gets exponentially harder.

Cash zero date

The cash zero date is the calendar date when cash hits $0 at current net burn rate.

It's runway expressed as a date rather than a count of months. Founders find this stickier than a number — "we run out in February 2027" is easier to act on than "we have 8 months left." Both numbers move when net burn moves, so update the date whenever you change the plan.

Breakeven

Breakeven is the month in which monthly revenue first exceeds monthly expenses.

From breakeven onward, you're cash-flow positive month-to-month — though you may still have an accumulated deficit. The calculator's breakeven mode finds the first month where compounding revenue catches up to (effective) expenses, given your inputs.

See also: default alive, MoM growth, methodology.