Default alive or default dead: the test, the math, the fix

You are default alive if, with expenses held flat and revenue growing at its recent rate, you reach profitability before the cash runs out. If you don't, you are default dead (Paul Graham, 2015). Run it with three numbers: cash, monthly revenue, monthly expenses, plus your recent monthly growth rate. A company with 12 months of snapshot runway needs about 6.8% monthly revenue growth to pass (editorial arithmetic below). Default dead is a plan problem you can fix. Cut burn, raise growth, or both, and write down the date you switch to plan B. Not legal, tax, or investment advice.

This page covers the test itself and the math behind it. To model your own numbers with a hire ladder, use the runway calculator. If the answer is bad and cash is short, go to when runway runs out.

The test in one table

Term	Definition	Source
Default alive	On flat expenses and recent revenue growth, you reach profitability on the money you have left	Paul Graham, Oct 2015
Default dead	Same assumptions; cash runs out before revenue covers expenses	Paul Graham, Oct 2015
Fatal pinch	Default dead, slow growth, and not enough time to fix it	Paul Graham, Dec 2014 and Oct 2015
Net burn	Cash out minus cash in each month	Kruze Consulting, Feb 2026
Snapshot runway	Cash ÷ net burn. $4.2M ÷ $350K = 12 months	Kruze Consulting, Feb 2026

Snapshot runway ignores growth. The default alive test adds it. A company with 12 months of snapshot runway can pass or fail depending on how fast revenue grows, so you need both numbers.

How to run the test

Take cash in the bank today. Leave out receivables and unsigned term sheets.
Take this month's revenue and this month's total expenses.
Take your monthly revenue growth rate over the last several months. Graham's wording is "what it has been over the last several months."
Grow revenue at that rate month by month, hold expenses flat, and subtract each month's loss from cash.
If revenue covers expenses before cash goes below zero, you are default alive. Note the month and the cash left.

A spreadsheet does this in twelve rows. Keep expenses flat only for the test. Run a second version with your real hire plan, because that is the plan you will spend against.

Labeled example: the growth rate you need

Editorial arithmetic. Not a company and not a market rate.

You have $3.0M in cash. Revenue is $100K a month and expenses are $350K a month, so net burn is $250K and snapshot runway is 12 months.

Monthly revenue growth	Result	When it resolves	Cash left at that point
3%	Default dead	Cash runs out in month 14	None
5%	Default dead	Cash runs out in month 15	None
About 6.8%	Break-even line	Revenue covers expenses in month 21	Close to $0
7%	Default alive	Revenue covers expenses in month 20	About $88K
8%	Default alive	Revenue covers expenses in month 18	About $425K
10%	Default alive	Revenue covers expenses in month 15	About $897K

Growth stretches runway past the snapshot figure even when you fail. At 3% a month this company still lasts into month 14, two months past the 12-month snapshot.

Now hold the same revenue and costs, and change only the cash. The break-even growth rate moves like this:

Snapshot runway	Cash at $250K net burn	Monthly growth needed to pass	Same rate per year
6 months	$1.5M	About 14.7%	About 5.2×
9 months	$2.25M	About 9.3%	About 2.9×
12 months	$3.0M	About 6.8%	About 2.2×
18 months	$4.5M	About 4.4%	About 1.7×
24 months	$6.0M	About 3.3%	About 1.5×

Graham writes that steep revenue growth, "say over 5x a year," lets you start to count on investor interest even while unprofitable. In this example, 5× a year is about what a company with six months of cash needs to pass the test on its own.

What a hire plan does to the answer

Graham calls hiring too fast "by far the biggest killer of startups that raise money." The example shows the mechanism.

Case (same $3.0M cash, $100K revenue)	Expenses	Growth	Result
Base	$350K	8%	Default alive in month 18, about $425K left
Add $70K a month of payroll now	$420K	8%	Default dead, cash runs out in month 12
Same hires, growth needed to pass	$420K	About 10.5%	Break-even line
Cut expenses by $50K a month	$300K	5%	Default alive in month 24, about $243K left

Four hires at about $17.5K a month each, fully loaded, would add that $70K. If the hires don't raise growth from 8% to about 10.5% a month, they move the company from alive to dead. Put the hire start dates in the model before you call the company default alive.

The cut row shows the other lever. At 5% growth the base company fails. Taking $50K a month out of expenses makes it pass, with about two years to profitability.

Why the gap between rounds matters

Default dead is safe only if investors save you, and Graham warns that you can never treat fundraising as more than plan A. The time between rounds sets how long plan A has to work.

Measure	Figure	Source
Median time, seed to Series A	2.0 years, Q1 2026	Carta, State of Private Markets Q1 2026
Median time, Series A to Series B	2.1 years, Q1 2026	Carta, State of Private Markets Q1 2026
Median time, Series B to Series C	2.4 years, Q1 2026	Carta, State of Private Markets Q1 2026
Median wait before a Series A, Q4 2024	774 days, about 2.1 years	Carta, fundraising guide
Runway Carta tells founders to plan for	At least 24 to 30 months, against a common 12 to 18 month target	Carta, fundraising guide

Carta calls the Q1 2026 intervals "historically elevated" and notes that early-stage gaps are starting to shorten. The planning advice stays the same. If you are default dead with 18 months of cash and the median gap to your next round is two years, your plan A needs better than median timing.

There is no reliable public benchmark yet for the share of Seed to Series B companies that are default alive, or for the monthly growth rate they run at. Use your own numbers and the arithmetic above.

What to do with the answer

Your result	Next move	Source
Default alive with room to spare	Talk about ambitious new things you could do with the cash	Paul Graham, Oct 2015
Default alive only with the current team	Keep hiring tied to growth. Rerun the test before each hire	Paul Graham, Oct 2015
Default dead, more than 8 months of cash	Cut burn, raise growth, or both, now. Write plan B and the switch date	Paul Graham, Oct 2015; YC, Caldwell
Default dead, 8 months of runway or less	Try to raise the money right now so you learn the answer while you can still act	Paul Graham, Dec 2014
Under 3 months of cash	Face the shutdown scenario. Caldwell writes that under 2 months is often the point of no return	YC, Caldwell, Jan 2015

Dalton Caldwell's YC post tells a default dead founder to grow revenue, cut costs, or both, right away. He lists PR, marketing, and perks as the first spend to cut.

The VEN (Venture Executive Network) session judgment lines up with Graham. Founders who run the test every month, with the hire dates in the model, catch a default dead plan while there is still time to change it.

Default alive check for this month's board pack

Pull three numbers. Cash today, this month's revenue, this month's total expenses.
Set the growth rate. Average monthly revenue growth over the last several months. Write down the window you used.
Run flat expenses first. Grow revenue, hold costs, subtract monthly losses until revenue covers costs or cash hits zero.
Run the hire plan second. Add each planned hire on its start date and rerun.
Find your break-even growth rate. Lower the growth rate until the plan fails. That number goes on the board slide.
Write plan B. The cuts you would make, their monthly savings, and the date you switch if the raise isn't working (Paul Graham).
Rerun it every month. Use the runway calculator or your own sheet, and keep the same definitions each time.

Mistakes founders make with the test

Using last month's growth spike. One strong month inflates the rate. Graham's test uses the last several months.

Leaving out the hire plan. The test holds expenses flat. Your plan doesn't. A pass on flat expenses can fail once the hires land.

Counting the next round as revenue. Graham's fix is to say it out loud: "We're default dead, but we're counting on investors to save us."

Asking too late. Graham's advice is to start asking too early. Worrying early costs little. Worrying late leads to the fatal pinch.

Treating gross burn as net burn. Runway divides cash by net burn, cash out minus cash in (Kruze).

Pair this with

Runway calculator with hiring plan to run the test with your own hire ladder.
When runway runs out for the cut, bridge, and wind-down paths.
Burn multiple vs Rule of 40 for the efficiency number beside the runway slide.
How to tell the board you missed the plan when the test fails mid-year.

Sources

Paul Graham, Default Alive or Default Dead?. October 2015. Definition of default alive and default dead on constant expenses and recent revenue growth; asked of startups operating more than 8 or 9 months; half of founders don't know; steep revenue growth "say over 5x a year"; never treat fundraising as more than plan A; write down plan B and when to switch; hiring too fast is by far the biggest killer of startups that raise money; start asking too early.
Paul Graham, The Fatal Pinch. December 2014. Default dead with slow growth and little time; with 8 months of runway or less, try to get the money right now.
Y Combinator, Advice for Companies With Less Than 1 Year of Runway. Dalton Caldwell, 22 January 2015. Default dead founders must grow revenue, cut costs, or both, right away; PR, marketing, and perks as first cuts; under 3 months of cash, account for shutdown; under 2 months often the point of no return.
Kruze Consulting, Build a Rolling Cash Forecast to Maximize Startup Runway. 22 February 2026. Net burn is cash out minus cash in; runway is cash ÷ net burn; $4.2M ÷ $350K = 12 months.
Carta, State of Private Markets Q1 2026 (full report). Data as of May 2026. Median time between primary rounds: seed to Series A 2.0 years, Series A to B 2.1 years, Series B to C 2.4 years; historically elevated; early-stage intervals beginning to compress.
Carta, Startup funding: a guide to raising startup capital. Median Series A in Q4 2024 waited 774 days (about 2.1 years) since the prior round; 12 to 18 months of runway is a common target; plan for at least 24 to 30 months.
VEN (Venture Executive Network). Founder sessions on runway and the board, 2026. Run the test monthly with hire dates in the model. Not a survey. No closed-session numbers.

Founders who have turned a default dead plan into a default alive one will pressure-test your growth rate, your hire dates, and your plan B in a VEN session.

Go deeper: VEN playbook note on default alive