Running out of cash

What running out of cash actually looks like

Cash death is rarely a surprise on the day it happens. It is a slow compression of options. Hiring stops, then marketing spend stops, then the founders stop paying themselves, then a payroll date arrives that cannot be met.

The distinguishing feature is that revenue and burn never crossed. Every month the company spent more than it earned, and the gap was funded by a finite pile of money that had a visible end date from the first day it landed.

• Runway under six months with no term sheet and no path to break even
• Growth that requires spend to continue, so slowing spend slows growth
• A funding round that took longer than planned, then did not close
• Revenue concentrated in one or two customers who churned or paid late

The warning signs that appear months earlier

The useful number is not your bank balance, it is the date that balance reaches zero at current burn. Founders who track a zero date behave differently from founders who track a balance, because a date forces a decision while a balance permits hope.

The second signal is the shape of your growth. If growth stops the moment paid acquisition stops, you do not have a growing company, you have a purchased one. That is a spending problem wearing a growth costume, and investors read it immediately in the diligence.

What you can still sell after the money is gone

A company that ran out of cash has usually not run out of assets. Code that took eighteen months and several hundred thousand dollars to build does not become worthless because the payroll account did. Neither do the users, the data, the domain, or the integrations.

Buyers of failed startups are usually buying time rather than a business. An operator who wants to enter your category can either build for a year or buy your codebase this month. That is the trade you are actually selling.

• Source code, documentation and deployment configuration
• Registered users and any data you can lawfully transfer
• The domain name, brand and social accounts
• Customer contracts, integrations and app store listings

Sell before the lights go off, not after

Value falls fast once a shutdown is public. Users leave, the domain lapses, the team scatters and nobody is left who can answer questions about the codebase. A startup sold with a founder available for thirty days of handover is worth materially more than the same assets sold six months later.

The practical advice is uncomfortable. The right moment to list is while you still have four to six months of runway, because that is when you can negotiate rather than accept.

Common questions

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