magnus919 Default Alive / Default Dead Calculator
A startup is "default alive" if its current revenue trajectory will reach profitability before it runs out of cash — without additional funding. It is "default dead" if it will run out of money first. This is the single most important financial diagnostic Paul Graham developed at Y Combinator.
This is not a fundraising model. It's a reality check. The answer determines whether fundraising is optional or existential.
When to Load
| Trigger | Example |
|---|---|
| "Am I default alive?" | Founder asking about runway |
| "How much runway do I have?" | Financial planning |
| "Should I raise money?" | Strategic decision |
| "What's my burn multiple?" | Investor-ready metrics |
| "How long until we break even?" | Trajectory check |
| "Default alive/dead analysis" | Explicit framework request |
When Not to Use
- Detailed financial planning. This is a diagnostic, not a budget. It projects one growth curve with fixed assumptions; it does not model hiring plans, contract timing, seasonality, or capital expenditures. Use a proper financial model for those.
- Fundraising valuation. The verdict tells you whether raising money is existential; it does not compute a valuation, cap table, or round size.
- Cost structures the default assumptions don't describe. The model splits burn into fixed and variable components (default 70/30). Hardware, R&D, or manufacturing companies with very different cost structures will get a misleading projection.
- Unknown or unstable growth. The model assumes a steady monthly growth rate with a small decay. A company in launch mode or product-market-fit search does not produce a meaningful projection.
- As the only input to a board decision. Treat the verdict as a conversation starter with your CFO or accountant, not as financial advice.
How to Use
Quick Answer (No Script)
For a quick check without running the calculator, use the simplified heuristic:
Burn Multiple = Net Burn / Net New ARR
| Burn Multiple | Signal |
|---|---|
| < 1x | Default Alive — growing efficiently |
| 1x–2x | Healthy — capital-efficient growth |
| 2x–3x | Warning — burning faster than growing |
| 3x+ | Default Dead — cash crisis without funding |
Full Analysis (Script)
Run the CLI calculator for a precise analysis:
python scripts/default-alive.py \
--monthly-revenue 50000 \
--monthly-burn 120000 \
--cash-on-hand 800000 \
--monthly-growth 8
Output shows: the verdict, burn multiple (net burn ÷ net new ARR), burn-to-revenue ratio (net burn ÷ MRR), projected cash-out month, months to breakeven, cash gap coverage at current spend, the model's assumptions, and the key levers available.
Required inputs
| Flag | Description | Example |
|---|---|---|
--monthly-revenue |
Current monthly recurring revenue (MRR) | 50000 |
--monthly-burn |
Total monthly operating expenses | 120000 |
--cash-on-hand |
Cash remaining in bank account | 800000 |
--monthly-growth |
Month-over-month revenue growth rate (%) | 8 |
Optional inputs
| Flag | Description | Example |
|---|---|---|
--revenue-growth-deceleration |
Annual growth deceleration rate (%/month, default: 0.5) | 0.3 |
--json |
Machine-readable JSON output | |
--verbose |
Show detailed month-by-month projection |
Output fields
| Field | Meaning |
|---|---|
projected_cashout_month |
Month cash runs out under the model; null if never within the 10-year projection |
burn_multiple |
Graham's burn multiple: net burn ÷ net new ARR |
burn_to_revenue_ratio |
Net burn ÷ MRR (secondary diagnostic, not Graham's metric) |
months_to_breakeven |
Months until revenue ≥ expenses (extrapolated) |
default_verdict |
ALIVE, DEAD, or MARGINAL |
revenue_at_breakeven |
Projected revenue when/if breakeven reached |
gap_to_breakeven |
Monthly shortfall remaining |
months_of_gap_remaining |
Static runway at current spend: cash ÷ monthly gap |
model_assumptions |
fixed_burn_pct, variable_burn_ratio, growth_decay_pct, projection_cap_months, safety_buffer_months |
levers |
What can change the outcome (increase price, cut costs, etc.) |
Methodology
The Core Calculation
The model projects month-by-month:
month_n_revenue = previous_revenue × (1 + growth_rate/100)
month_n_burn = fixed_burn + (variable_burn_ratio × month_n_revenue)
month_n_cash = previous_cash + month_n_revenue - month_n_burn
Growth rate decays over time (default: 0.5% per month) to model market saturation — startups don't grow at a constant rate forever.
Default Alive Test
The startup is Default Alive if:
projected_revenue > projected_expenses
at some point before cumulative cash goes negative, and the crossover happens with at least 3 months of remaining runway (safety buffer).
It is Default Dead if cash runs out first.
It is Marginal if breakeven happens with less than 3 months of runway remaining — technically possible but dangerously tight.
Burn Multiple
A metric Graham began tracking at YC to measure capital efficiency:
Burn Multiple = Net Burn / Net New ARR
Where:
- Net Burn = cash spent per month (total expenses minus revenue)
- Net New ARR = new annual recurring revenue added that month
A burn multiple below 1x means the company is generating more than it spends in new ARR terms — the strongest default-alive signal.
Levers
When the verdict is DEAD or MARGINAL, evaluate these levers (in rough order of impact):
- Revenue growth — 10% faster growth compounds dramatically over 18 months
- Cost reduction — Every dollar cut extends runway by one dollar
- Pricing — A 20% price increase with minimal churn impact is often the fastest lever
- Gross margin — Reducing COGS improves unit economics without topline change
- Funding — Default dead means fundraising is existential, not optional
Examples
YC Typical Profile (Default Dead under the model)
python3 scripts/default-alive.py \
--monthly-revenue 30000 \
--monthly-burn 75000 \
--cash-on-hand 500000 \
--monthly-growth 10
- Projected cash-out: month 14
- Burn multiple: 1.25x (net burn / net new ARR)
- Breakeven would require 22 months, after cash runs out
- Verdict: DEAD — needs faster growth, cost cuts, or funding
Pre-Revenue Startup (Default Dead)
python3 scripts/default-alive.py \
--monthly-revenue 0 \
--monthly-burn 80000 \
--cash-on-hand 400000 \
--monthly-growth 0
- Projected cash-out: month 8 (the model burns only the fixed 70% of burn at zero revenue)
- Burn multiple: undefined (no revenue)
- Verdict: DEAD — fundraising is existential
Capital-Efficient SaaS (Default Alive)
python3 scripts/default-alive.py \
--monthly-revenue 150000 \
--monthly-burn 180000 \
--cash-on-hand 2000000 \
--monthly-growth 7
- Projected cash-out: none within the 10-year projection
- Burn multiple: 0.24x (net burn / net new ARR)
- Verdict: ALIVE
References
references/default-alive-framework.md— Paul Graham's original framework with essay excerptsreferences/yc-fundraising-context.md— How default state drives fundraising strategyyc-weekly-growth-compasscompanion skill — For growth rate analysis