Startups

Three Runways Entrepreneurs Must Consider

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Founder & CEO of fashion tech startup Mys Tyler. Sarah is serial entrepreneur, global citizen (until recently), and consumer marketing pro.

The stats vary by source, but what everyone agrees on is that most startups fail. Startups are hard work and fragile; they take a special mix of grit, luck and imagination. While there are myriad success factors, failure generally comes down to running out of runway. 

Financial Runway

When discussing a startup runway, most people talk about the financial side of things. How much cash the business burns through per month is the burn rate, and the cash in the bank divided by the burn rate gives you the runway. This is the number of months before your business is bust, that is unless you extend your runway by reducing your burn rate, injecting more cash into the business (through increased revenue or funding), or your business takes flight as you cross the chasm to profitability.

Startups, particularly at the early stage, require testing and the validation of ideas. At this stage, money spent is often referred to as “dumb money” because you don’t yet know the return on the dollars spent. For this reason, it can be difficult to accurately predict your financial runway, and so you always want a few extra months of buffer to give you time to figure things out or extend that runway further.

Running out of runway takes a psychological toll on the founders and the employees if they are privy to the position of the company. But even if your financial runway is in good shape, and even if your business is profitable, there are two other equally important runways to consider that are often overlooked.

Emotional Runway

Startups are hard and for no one more than the founders, who are often unpaid, overworked and have no one but themselves to complain to about the harsh working conditions. You spend a substantial portion of your time doing things you’re not good at, carrying the psychological burden of being able to provide security for your team, and often absorbing any gaps and catching any falling balls. And with the constant context switching, it all adds up to something that is pretty exhausting. 

All of this is weighed against the constant opportunity costs of giving up a potentially well-paid job with security and the ability to switch off. So, it’s no wonder that founders can burn out and trade in the life of the entrepreneur for something that offers a better quality of life.

Entrepreneurs need to manage their energy and their emotional runway to ensure they can go the distance. That means finding ways to stay healthy, connected and make the startup hustle sustainable.

Equity Runway

Raising money is great. It extends your financial runway, and it might enable you to pay yourself something and extend your emotional runway to boot. But while that makes it seem like you should take whatever money you can get, this is where the third runway comes into play: equity.

It’s often true that it’s better to have a smaller piece of something big than a larger piece of something small (or of something that fails), but it’s still a balancing act. Giving away too much equity is dangerous for entrepreneurs and investors alike.

At worst, you can lose control of your business or lose so much equity that you become a flight risk (a worrying sign for future investors when the founder has too little skin in the game). And so that means you need to plan for your equity to last the funding future of your business. How much will you need to raise, when and at what valuation and how much can you afford to give up?

Finding Success

You can keep stacking the odds of success in your favor by having the right team mix, being in the right market, having the right advisors and implementing in the best way. But to avoid failure, you can’t take your eye off your three runways to give you time to “figure things out” and take your startup into flight.


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