Runway

A company's runway is the amount of time it has until its funds run out.

OCV companies are funded with ~18 months of runway to achieve initial traction and reach an inflection point for fundraising. Faster growth leads to a higher valuation and increases your odds of successfully fundraising. It's fine to let runway drop low when approaching real traction—VCs invest in momentum, not cash reserves.

Prioritize achieving "lift" (meaningful traction) rather than simply extending runway for an arbitrary amount of time. Identify the most critical inflection point you need to reach to fundraise, and structure your spending to achieve that milestone.

The #1 mistake founders make is thinking you can extend your runway to success. This leads founders to aim for maintaining a long runway instead of gaining traction as quickly as possible. Preserving your runway seems efficient, but it’s the opposite. Companies need speed to raise their next round. Using cash to increase the speed of growth is the way to go, even if it shortens your runway. Keith Rabois (Khosla Ventures) explains further,

“If you think about lift in a plane context, a company is only valuable if you achieve lift. Runway is a tactic for achieving lift, and you may need to extend the runway so that you have more time to get lift. But unless you’re actually achieving lift with that extra time, it doesn’t help you.”

Burn rate

Burn rate is the speed at which a startup spends its cash. It determines the company's runway.

Spend to accelerate growth—what do you need to spend to grow 20% WoW? If increased spending on one activity has a high probability of generating a lot of usage and/or revenue, take the risk.

Measure the speed and potential payoff of actions and go after the activities with the quickest payoff.

Capital efficiency

Capital efficiency measures how effectively a startup uses its invested capital to generate growth. It measures how much value you can create from each dollar spent.

Sustainable unit economics is important—spending more than $1 on customer acquisition to generate $1 in revenue is bad business. Evaluate decisions by this standard: Are you spending the minimum to drive maximum revenue?

Capital efficiency means finding many low-cost, high-revenue activities—not refusing to spend.