In the vernacular of emerging companies, “runway” is the amount of time a business has to launch itself into the air. The length of the runway is a critical aspect of a business’s ultimate success. A longer runway allows a company a greater margin for error: that is, an ability to absorb setbacks and to adjust its business plan. Cash generated from operations and from outside financing lengthens a company’s runway and the cash burn rate (losses) shortens a company’s runway.  You may be asking yourself “How do I raise the Right Amount of Money?  There is no right or wrong answer, but carefully considering alternatives and planning is important.

Keys to lengthening the runway through outside financing includes identifying sources of funding and understanding terms of a typical Series A financing (a/k/a the first round after a “friends and family” support).   Here are some tips:

As soon as you raise capital form investors, you need to keep track of issued equity in a capitalization table.  To make it easier for you, here is an example of a Model Capitalization Table.

Founders should consider whether a Section 83(b) Election under the Internal Revenue Code is needed to save them taxes on exit.

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