In the SmartUp methodology, runway is directly tied to the principle that “Time is Money.” Yonatan Stern defines a company’s available time using a simple formula: the amount of money in the bank divided by the company’s monthly expenses. This calculation determines how long the company can survive before cash runs out.
SmartUp distinguishes between two fundamental states based on runway. A company that is losing money is living on “borrowed time.” For example, if a company loses $1 million per year and has $3 million in the bank, it has exactly three years to live. Once the cash is gone, the company dies. In contrast, a company that reaches profitability enters the “Infinite Game.” If a company generates even slightly more cash than it spends, its runway becomes indefinite and it no longer depends on investors for survival.
Hiring has the greatest impact on runway. Stern emphasizes that salaries usually represent 70-80% of expenses in technology companies. These costs are considered rigid expenses because employees cannot be hired and fired month-to-month without major disruption. Every additional hire permanently increases monthly expenses and shortens runway.
Stern illustrates this with a model: a company with $5 million in the bank and five employees may have six years of runway, operating in a relatively safe zone. If that same company grows to 30 employees, its runway may shrink to just one year, pushing it into a desperate fundraising cycle.
A common startup trap described in the lectures occurs when companies raise capital and immediately scale headcount. This sharply increases burn rate, often reducing runway to less than a year and forcing founders to focus entirely on raising the next round instead of building a sustainable business.
To extend runway, SmartUp advises keeping teams small and inverting the process by branding and selling before hiring a large team. This ensures revenue begins flowing before expenses become too high.
