How much cash should a startup keep in the bank?
There is no fixed reserve figure. For an early-stage startup the number that matters is runway — cash divided by monthly net burn. Keep enough to reach your next milestone plus a buffer, and start raising with about six months left. Under three months of runway is a danger zone.
Runway, not a fixed reserve
Personal finance says keep three to six months of expenses. A startup is different: your costs and revenue are moving, so the useful number is not a fixed pile of cash but your runway — how many months you can operate before cash hits zero at your current net burn (costs minus gross profit).
Two companies with the same $150k in the bank can be in completely different positions: one burning $5k a month has thirty months; one burning $25k has six.
How much buffer is enough
If you plan to raise, the common target is 18-24 months of runway after the round, because a raise takes about six months to close and you want time to hit the milestones that justify the next one. If you are bootstrapped, the goal is to stay default-alive with margin — enough cushion that a slow quarter does not end the company.
The practical trigger: start raising, or start cutting, when you have roughly six months of runway left. Under three months is a danger zone where one bad month can be fatal.
Why the cushion exists: variance
The buffer is not there for the plan — it is there for when the plan is wrong. A churn spike, a slow sales month, a delayed round: each eats cash you did not budget for. The cushion absorbs the variance you do not control, which is exactly the part a spreadsheet projection tends to ignore.
How to size your cushion
Project your cash forward month by month, find the month it would hit zero, and keep a buffer on top equal to the swing you cannot control. The fastest lever to widen it is cutting burn; the slower one is growing revenue toward break-even. Model both before deciding how much to raise.
FAQ
Does the "3-6 months of expenses" rule apply to startups?
Not directly — that is personal-finance advice for stable incomes. A startup grows and its burn changes, so the equivalent is runway to your next milestone plus the roughly six months a raise takes, not a fixed multiple of monthly costs.
How low is too low?
Under about six months of runway you should already be raising or cutting; under three months you are in a danger zone where a single bad month or a delayed round can end the company.
Related guides
Related tools
- Runway & Burn Calculator — How long until I run out of cash? Your zero-cash date and break-even month.
- Burn Rate Calculator — The simplest runway: your cash divided by monthly burn.
- Burn Multiple Calculator — How much cash you burn per $1 of new ARR — capital efficiency, stage-aware.
- See all: Cash & runway
Related benchmarks
Check your own numbers.
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Last updated: June 25, 2026. For information only — not financial advice.