Runway answers the single most urgent question for an early-stage company: how much time is left before the money runs out? It's calculated by dividing current cash on hand by the net monthly burn rate, assuming spending and revenue stay roughly constant.
The common advice is to start fundraising with at least 6-9 months of runway remaining, not when the bank account is nearly empty — because a fundraise typically takes 3-6 months from first pitch to money in the bank, and negotiating from a position of scarcity produces worse terms. Investors generally like to see 18-24 months of runway right after a round closes.
Runway is a moving target, not a fixed number: any change in hiring, spend, or revenue growth immediately shifts it, which is why most founders recalculate it monthly rather than treating it as a one-time estimate.