Record numbers of startups are currently being founded in Germany, while at the same time a record number are going bankrupt. According to Handelsblatt, which cites data from the service Startupdetector, more young German companies filed for insolvency in the first half of 2024 than ever before. The ‘German Startup Monitor 2025’ also paints a divided picture: while individual scaleups raise record rounds, capital remains the main bottleneck for most founders.
Often, it isn’t the best idea that determines a startup’s survival, but rather the question of how long the money will last. And that is precisely where many calculation errors happen.
Revenue: What actually counts as revenue
Before burn rate and runway can even be calculated, a clear definition of revenue is needed. Many founders confuse three different figures in the process.
The first is booked revenue. A signed annual license for 24,000 euros is often booked as 2,000 euros in monthly revenue. That is correct from an accounting standpoint, but says nothing about when the money actually arrives in the bank account. The second figure is collected revenue—that is, what is actually recorded as an incoming payment within a given period. For calculating the runway, only this figure counts, because the bank doesn’t care what is on the balance sheet, but rather what is sitting in the account.
For startups with recurring revenue, a third key metric comes into play: Monthly Recurring Revenue (MRR) or, annualized, Annual Recurring Revenue (ARR). Here, only the predictable, recurring portion of revenue counts—meaning subscriptions, license fees, and ongoing contracts. One-off revenues such as setup fees, consulting services, or project work do not belong in MRR, even if they hit the account in the same month. Anyone who mixes the two systematically overestimates how stable their revenue actually is.
Looking at existing customers is just as important. What is known as Net Revenue Retention shows how revenue from existing customers develops over time. This can change repeatedly through upgrades, downgrades, and cancellations. A startup can show impressive new customer figures and still stagnate or shrink if too many existing customers churn at the same time.
Gross Burn and Net Burn
The burn rate can only be calculated meaningfully on the basis of cleanly defined revenue. Gross burn is the sum of all monthly expenses – salaries, rent, software, marketing, service providers. Net burn subtracts the revenue actually collected from this. A startup with 150,000 euros in expenses and 50,000 euros in actual incoming payments therefore has a gross burn of 150,000 euros, but a net burn of only 100,000 euros.
The Runway Formula
Runway is the period of time a startup has left before the money in its bank account runs out. The name actually comes from aviation. It describes the runway and how much time the plane still has to take off or fail to do so. In startup terms, this means: Will you become profitable, or do you need fresh capital?
For the runway calculation, only the net burn counts, as only it shows how quickly the bank account is actually running dry. The runway formula itself is straightforward:
Runway (in months) = available capital ÷ monthly net burn
An example: A startup has 900,000 euros in its account and a monthly net burn of 75,000 euros. This results in a runway of twelve months. Sounds clear enough – but it isn’t if the calculation is based on a single month. A quarter with a trade fair appearance, a wave of recruiting, or seasonal marketing expenses distorts the snapshot considerably.
A rolling average over the past three to six months is significantly more robust. Additionally, it helps to sort costs into three categories: fixed costs such as rent or salaries, which recur every month; variable costs such as cloud expenses, which grow alongside the business; and one-off costs such as a trade fair booth or a legal bill, which only appear in a single month.
How much runway is enough?
In practice, fundraising processes often take several months. According to US market data from Carta the average time between a Seed and Series A round in the second quarter of 2025 was 616 days, or roughly 20 months. Reliable comparable figures for Germany are lacking, but the persistently high number of German startup insolvencies points in a similar direction. Those who calculate too tightly will come under pressure before the next round is in place.
In practice, the rule of thumb is therefore increasingly to actively launch the fundraising process with eight to twelve months of runway remaining at the latest.
The Burn Multiple
The burn multiple is another metric that investors are increasingly asking for in Germany as well. It compares net burn to net new annual recurring revenue (Net New ARR) and answers the question: How many euros are burned to generate an additional euro of recurring revenue?
A startup with a monthly net burn of 100,000 euros that generates 80,000 euros in new ARR has a burn multiple of 1.25. Generally, the lower the figure, the more capital-efficient the company. Its trajectory over time is also crucial: if the burn multiple decreases while growth remains stable, that sends a strong signal to investors.
The most common calculation errors
Using booked instead of collected revenue. An issued invoice is not a cash inflow. Anyone who factors outstanding receivables into the calculation before they are actually settled is miscalculating their liquidity.
Mixing one-off effects into the average. A large legal bill as well as one-off project revenue distort monthly calculations if they are not flagged separately.
Ignoring restricted cash or growing costs. Earmarked funding does not count toward freely available capital, and a growing cost base from new hires or rising cloud costs cannot be reflected by the current month alone.
Extending runway without sacrificing growth
If the runway is too tight, many startups start making radical cuts. But that carries risks. Cutting marketing that is proven to work slows down the exact revenue growth that is supposed to extend the runway in the first place.
Targeted levers are more effective: reviewing office costs before a team grows; regularly auditing SaaS subscriptions; shortening payment terms with customers to convert revenue into actual cash more quickly; staggering hires over time or initially covering them with freelancers. Non-dilutive forms of financing, such as subsidized loans or revenue-based financing, can also buy time in the short term without giving up equity.
Conclusion: A startup’s most important survival clock
Burn rate and runway stand and fall with a clean revenue definition. A precise, honest calculation often determines whether a startup negotiates from a position of strength or has to improvise at the last minute.