Runway is just cash divided by burn
Silicon Valley is a region in Northern California, located in the southern part of the San Francisco Bay Area and corresponding roughly to the Santa Clara Valley, known as a global center for high technology and innovation. Tech businesses elsewhere in the state, from Orange County to San Diego, Los Angeles and the Sacramento region, share the same basic financial arithmetic: the number of months the company can operate is the cash on hand divided by the monthly burn. Salaries, cloud hosting, software and rent drive the burn. Anything that shortens the wait for revenue lengthens the runway.
Two kinds of tech business, two cash patterns
| Product or SaaS company | IT services or consultancy | |
|---|---|---|
| Main cost | Engineers, cloud costs, sales | Billable staff, contractors |
| Revenue timing | Subscriptions, often monthly or annual | Invoices on terms after delivery |
| Typical squeeze | Long gap before recurring revenue covers burn | Payroll before the client pays |
The invoice problem in IT services
An IT services firm may bill a client monthly and wait thirty to sixty days for payment. Large clients often have procurement and accounts-payable processes that do not follow the contractor's payroll calendar. The firm's consultants have to be paid each cycle regardless. A new project that requires hiring two more engineers raises payroll right away and income only after the first approved invoice.
Hardware, hosting and tools
- Laptops, test devices and networking equipment for a growing team
- Cloud hosting that rises with usage, often before revenue does
- Security tools, compliance reviews and insurance
- Licenses and subscriptions that renew monthly or annually
Hiring ahead of the contract
Good engineers are hard to find and take time to onboard. Many owners prefer to hire when a contract is signed and not wait until it has started billing. That decision spends cash on payroll for the weeks or months before the first payment. A product company often faces the same trade-off with sales hires: the salary starts immediately, while the pipeline takes time to turn into subscriptions.
A worked example, for illustration only
For illustration, a five-person IT services firm wins a contract that requires three more engineers. Monthly payroll and tools for the new team come to $45,000, and the client pays sixty days after invoice. The firm is funding about $90,000 to $135,000 before it receives a payment. Working capital allows the firm to staff the project properly. These figures are not our terms or a typical result.
How to apply
If hiring or hosting costs are moving faster than receipts, a funding decision based on your bank deposits can extend your runway. The application takes about five minutes. We ask for roughly three months of business bank statements and use a soft credit pull; no tax returns are required. FICO 500 and above is considered, funding runs from $25,000 to $5,000,000, and money can arrive in as little as 24 hours. Sole proprietors can apply. Start your application.