How much runway should you target between financing rounds?

Entrepreneurs have limited access to hard data that could help them make sound decisions when trying to build a successful new company. This is generally due to a fundamental lack of information about the materialized events of previously successful companies.

Consider that there are a few hundred thousand companies founded each calendar year in the United States (Bureau of Labor Statistics, 2016), but only ~ four thousand venture capital deals are reported in any given year. Each year between five and six hundred VC-backed entities are acquired, and a few hundred become publicly traded companies (WilmerHale, 2017). That’s honestly not a lot of data, and unless an entrepreneur has access to any of this historical data — or has the time to do the research — they’re pretty much driving blind when making critical decisions.

There are numerous questions that entrepreneurs need to answer with incomplete, or worse, false information. One example is—

How many months of runway should I target between rounds when pursuing venture capital financing?

According to CBInsights, running out of cash is the second leading cause of startup failure. Needless to say—it’s an important question to get right. If an entrepreneur tries to answer this question by triangulating from Google results, they’ll find a few sources that tell them the conventional wisdom is anywhere between 12-to-18 months.

CBInsights estimates the median time lapse between funding rounds for Tech companies to be somewhere in the neighborhood of 12 months for Seed to Series A and 15 months for Series A to Series B. On Quora you’ll find peers, who with no doubt good intentions, also confirm the 12-to-18 month conventional wisdom. Some experienced VCs however, such as Fred Wilson, recommend planning for about 18 months of runway between rounds. Steve McDermid, Corporate Development Partner at A16Z, also suggests being prepared for the process to take longer than one might expect, and to give yourself “plenty of cushion when assessing your cash runway”. So what’s an entrepreneur to do?

Is it possible that the startup failure rate is so high partially because conventional wisdom tells founders to prepare for 12-to-18 months between financing events when in reality they should be preparing for longer as the experienced VCs suggest? We ingested all of Crunchbase to find out.


Sebastian Quintero
Journal of Empirical Entrepreneurship

Founder, CEO and Chief Scientist @ Invariant Studios