If you run a startup, there are two financial metrics you should review regularly: Burn Rate and Runway.

These metrics help you understand how quickly your company is using cash, how long it can continue operating with its available resources, and, above all, how much time you have to make decisions before liquidity or financing pressures emerge.

Many founders focus their attention on sales, growth, or the next funding round. However, the reality is that financial problems often begin long before they become obvious. Burn Rate and Runway help identify early signs of financial distress and allow businesses to take action while there is still room to manoeuvre.

In this article, we explain what these metrics mean, how to interpret them and why they can become a key tool for protecting a startup’s long-term sustainability

Is Your Startup Burning Cash Faster Than Expected?

Imagine a tech startup that has just closed a €1 million funding round.

With these new resources, the team decides to accelerate growth by hiring new sales professionals, strengthening product development and increasing marketing investment. The initial results appear promising. Revenue grows, new customers come on board and the outlook is positive.

However, as the business develops, cash begins to disappear faster than expected. Every month, the company requires more resources to sustain its growth rate and, almost without realising it, has less time available to achieve its objectives.

This situation is far more common than many founders realise. And this is precisely where two of the most important metrics for any startup come into play: Burn Rate and Runway.

Burn Rate: The Speed at Which You Burn Cash

Burn Rate measures the pace at which a startup consumes cash to fund its operations.

Formula: Monthly Burn Rate = Monthly Cash Outflows – Monthly Cash Inflows

In simple terms, it shows you how much money leaves the bank account each month after accounting for the revenue generated by the business.

A high Burn Rate is not necessarily bad news. Many startups invest aggressively in product, talent acquisition or market expansion during their early stages because they prioritise growth over short-term profitability.

The problem arises when that level of spending is no longer supported by a clear strategy, or when funding prospects begin to deteriorate. At that point, every euro spent reduces the company’s ability to react if things do not go according to plan.

Runway: The Time Left to Make Decisions

If Burn Rate measures speed, Runway measures time.

Formula: Runway = Cash Available / Monthly Burn Rate

This metric calculates how many months the company can continue operating while maintaining its current rate of cash consumption.

Returning to the previous example, if the startup has €1 million in cash and burns €100,000 per month, it has approximately 10 months of Runway.

However, if a few months later it decides to expand its workforce, strengthen its sales team and accelerate certain investments, its monthly Burn Rate may increase to €150,000. Even if the company continues to grow, the time available to react will have been significantly reduced.

And that is the key point: many startups remain focused on growth while the real issue lies in how quickly their room for manoeuvre is shrinking.

The Most Important Metric Is Not the Number Itself, but the Trend

One of the most common mistakes founders make is analysing these metrics in isolation.

What truly matters is understanding how they evolve over time.

A steadily increasing Burn Rate without a corresponding improvement in business performance, or a Runway that shortens month after month, are often warning signs that deserve close attention. Not because they necessarily indicate an imminent crisis, but because they reveal that the company has less and less time to correct potential problems.

In our experience, many startups seek professional advice only when they have a few months of cash remaining or when an anticipated funding round fails to materialise. However, identifying risks earlier is far more effective, while strategic alternatives are still available.

When Should a Startup Be Concerned About Its Burn Rate?

There is no universal figure that applies to every startups. A high Burn Rate can be perfectly reasonable during a period of rapid growth or expansion.

What matters is analysing the combined evolution of Burn Rate, Runway and the company’s actual ability to achieve its business objectives or secure new sources of funding.

Some warning signs that deserve particular attention include:

▸ A constant increase in cash burn.
▸ Delays in expected funding rounds.
▸ Excessive dependence on external financing to maintain operations.
▸ A rapid reduction in Runway.
▸ Growing tensions with suppliers or creditors.
▸ Recurring delays in payment obligations.
▸ Rising costs without a corresponding increase in revenue.
▸ Limited visibility over future cash flow.

Identifying these situations at an early stage allows founders and management teams to evaluate alternatives and take action while there is still scope to do so.

When Your Room for Manoeuvre Begins to Shrink

If these metrics start to show a negative trend, decisions relating to funding, investors, creditors and corporate structure begin to have a direct impact on the company’s continuity.

Experience shows that most business crises do not emerge overnight. In many cases, there are early indicators that allow companies to anticipate problems, reassess their funding strategy, explore restructuring alternatives and implement measures aimed at protecting both the business and its directors.

Acting at the right time does not always prevent difficulties, but it significantly increase the options available to manage them effectively.

Anticipating Is the Best Way to Protect a Startup

Understanding and monitoring Burn Rate and Runway is not simply about tracking two financial indicators. In reality, it means understanding how much room for manoeuvre a startup has to adapt, correct course and make informed strategic decisions.

The sooner the first signs of financial distress are detected, the greater the likelihood of preserving company value, protecting founders and directors, and safeguarding the long-term viability of the project.

At AGM Abogados, we advise startups, founders and investors facing financial challenges, helping them identify risks, assess available options and make informed decisions while there is still time to act.

If you would like to learn more about our approach to supporting startups facing financial difficulties or restructuring processes, visit AGM Abogados' Legal Advisory Services for Startups in Crisis page.

A trade mark watch is crucial in the protection of your brand and provides a cost-effective way to prevent the dilution and loss of trade mark rights. A watch ensures the early detection of identical and similar marks recently filed in the classes and countries of interest to you and affords the opportunity to oppose third party applications that may otherwise go unnoticed, thereby undermining your registered rights.

A watch’s coverage can be as wide or as specific as required, with some businesses choosing to watch only one or two countries and others watching global regions. One example of a jurisdiction in which we have seen an increase in watch requests is China, as more and more UK businesses identify it as a priority market. Whilst IP issues occur everywhere, China has been highlighted as having particularly high exposure to bad faith trade mark applications and trade mark squatting has been seen as a profitable and low-risk activity for a number of years. A watch provides the ability to issue a cease and desist letter or lodge an opposition through the Chinese IP Office before the trade mark is granted and consequently places the existing rights holder in a stronger position than being held to ransom after a registration has been granted.

Moving closer to home, a UK watch has been key for over a decade, since the UK IPO abolished ‘relative grounds’ examinations (which prevented the registration of conflicting trade marks). Following Brexit, the importance of watching the UK Trade Mark Register has increased even more, as on 1 January 2021, holders of EU Trade Mark Registrations and International Registrations designating the EU were granted a comparable right in the UK. This created over one million comparable UK trade mark rights and the number of potentially conflicting trade marks on the UK Register has grown considerably. It is therefore vital that suitable monitoring is in place, although bear in mind that the UK IPO will notify owners of earlier UK trade marks (whether registered or applied for) of any same or similar cloned marks.

Aside from cloned marks, the demand for UK trade marks post-Brexit has surged and record numbers of trade mark applications have been filed.

In summary, timely detection of conflicting trade marks greatly increases your chances of resolving a dispute at an early stage and in many cases, avoids the expense of costly legal proceedings.

If you would like to discuss Boyes Turner trade mark watching services, please contact Boyes Turner's commercial and technology team.

A recent decision by the High Court in the case of C & J Clark International Limited (trading as Clarks) v Trek Bicycle Corporation has served as a reminder of the importance of keeping to the terms of historic co-existence agreements and the need for renegotiation if a business branches out into other areas. The case also highlights that informal arrangements discussed, for example, in meetings, are unlikely to overturn formal written conditions.

In brief, the dispute concerned the use of the word 'TREK'. By means of a co-existence agreement entered into in 2001, an arrangement was reached whereby Trek could use the name for cycling goods and apparel, and Clarks could use it for footwear. Despite successful co-existence over many years, Trek's expansion in 2016 into TREK-branded cycling shoes ultimately led to formal litigation.

Interpretation of Co-Existence Agreements in UK Trade Mark Law

Trek argued that cycling shoes were not footwear according to the agreement and that the term 'footwear' was not intended to include cycling shoes, since Clarks did not operate in that area. In addition, Trek claimed that it had informal consent from Clarks (via a 2018 meeting) to venture into that field. The Court disagreed, finding that 'footwear' includes shoes designed to be worn on the feet, regardless of specialisation and that the informal meeting discussion fell short of clear consent, especially in view of the formal, carefully negotiated written co-existence agreement.

Risks of Co-Existence Agreements for Brand Owners

The case is a reminder of the benefits and drawbacks of co-existence arrangements; whilst they are a useful tool, providing the ability for potentially confusing trade marks to co-exist in the marketplace, these arrangements can impose unduly onerous restrictions on the use of a mark. Effectively managing these arrangements requires robust internal processes, to ensure compliance with the terms.

Drafting and Future-Proofing Trade Mark Agreements in the UK

It is vital that any agreement includes the following points:

⟢ Clearly identify the parties and the trade marks involved, including their registration status and the classes of goods and/or services they cover;
⟢ Detail the commercial activities and geographical locations in which co-existence will be permitted;
⟢ Set out any restrictions on use, such as limitations on online marketing or keyword advertising;
⟢ Consider expansion plans and how the potential use of global websites for marketing will impact the arrangement. Future commercial strategies and emerging technologies should be considered;
⟢ A start date and, if appropriate, end date must be included;
⟢ Include a statement about which law applies and in which country any legal action should be brought.

In summary, whilst co-existence agreements can be a practical solution to avoid disputes, they require careful drafting so that each party’s rights are not disproportionately restricted. If drafted too tightly, the scope of a business' expansion into new markets can be severely impacted.

Next Steps

If you would like advice on trade mark co-existence agreements or ensuring your arrangements remain fit for purpose, please contact a member of Boyes Turner's Commercial and Technology team.