Runway claims that survive diligence: a checklist

Every Series A–C fundraise I’ve been close to ends the same way: diligence starts on the data room, and somebody’s runway number is wrong. Not catastrophically wrong — wrong by two months, or by one cash line the model treats as “strategic” and diligence treats as “recurring.”

Two months is enough to lose a term sheet, or to pay for it with a lower valuation.

Here is the checklist I run before any runway number leaves the practice. It is not exhaustive. It is the stuff that actually blows up in diligence.

1. The starting cash balance has to match the actual bank balance

Not the GL cash balance. The actual bank balance on the closing date of the period. If the last reconciliation is four weeks old, your runway model is working from a number that is four weeks old — minus whatever has moved since.

What to ship: Runway starts from confirmed-bank cash on [date], reconciled on [date]. If the reconciliation is stale, the model says so.

What fails diligence: “Cash per books $14.2M.” With no reconciliation date.

2. Burn rate has to be consistent with GAAP operating expense

Burn rate ≠ “the check I wrote last month.” Burn rate = operating cash outflow, measured consistently, with the one-time items called out. If you include a $400k payroll true-up in one month and not in another, you get a “burn rate” that jumps $400k month over month and nobody can explain why.

What to ship: Burn = trailing-3-month average of operating cash outflow, one-time items called out separately with amounts.

What fails diligence: A single month’s number, unnormalised, buried in a footnote.

3. The burn multiple has to be defined the same way everywhere

Burn multiple = net burn / net new ARR. Fine. But if your ARR bridge uses one definition (“bookings ARR”) and your burn multiple narrative uses another (“net new recognized revenue run rate”), diligence will find it and ask you to restate both.

What to ship: The formula, the numerator, the denominator, the period, and the comparison basis — all in one place, preferably one metric card with a formula line.

What fails diligence: Burn multiple cited without its inputs.

4. Capex and working-capital swings have to be visible

A company with $2M of positive working-capital swing this quarter has an apparent burn rate that is $2M/3 = $667k/month lower than its structural burn. That is not runway you can count on — it’s a one-time benefit.

The same is true in reverse. A big AR collection spike in Q4 lowers apparent burn; a big AR build in Q1 raises it. If your runway narrative doesn’t separate structural burn from working-capital swings, it’s telling a story that won’t repeat.

What to ship: Structural burn line, working-capital swing line, capex line, total cash outflow line. In that order.

What fails diligence: “Burn $1.1M/month” with no decomposition.

5. The forward plan has to be explicit about what’s committed vs. what’s optional

Runway at current burn is one number. Runway at planned burn is a different number. Runway at current burn minus discretionary expense you could cut in ninety days is a third number.

Investors in diligence want all three. They want to know what the base case looks like, what the forward plan looks like, and what the downside case looks like — and they want to know which costs are contractual (leases, FTE for the notice period), which are discretionary (marketing, travel, consultants), and which are in between.

What to ship: A three-line runway table — base, planned, stressed — with the delta on each line explained.

What fails diligence: A single number labeled “runway: 16 months” with no sensitivity.

The reconciliation you owe the board

Before a runway claim leaves the practice, four things should reconcile:

1. Bank balance ↔ GL cash (reconciled, with a date).
2. Burn rate in PDF ↔ burn rate in deck ↔ burn rate in dashboard (identical figures and identical formulas).
3. Net new ARR in the ARR bridge ↔ net new ARR in the burn-multiple narrative (same number, same period).
4. Forecasted runway ↔ hiring plan ↔ budget (all three ingest the same planned headcount and planned compensation).

If any of those four don’t reconcile, the package shouldn’t ship yet. We have that wired into delivery as a hard block. I’ve been on the other side of a broken reconciliation in diligence. The two hours it costs to get them right is the cheapest two hours you’ll ever spend.

The memory that makes this repeat

The first time my CFO walks through the reconciliation checklist on an engagement, the specific definitions we used — how working capital is separated from structural burn, which line items are contractual, what the board is paying attention to — should live forever in the decision ledger. Next month’s runway narrative leads with those definitions. Next quarter’s diligence room is already in the format a typical diligence team expects.

Runway is a number that sounds simple. The reason it is not is that it sits on top of five or six reconciliations. Getting them right once is one thing. Getting them right every month, coherently, across a CFO transition — that’s the practice.