Startups & Business › Metrics & Unit Economics

Default Alive

Whether the company reaches profitability on current growth before the money runs out.

Tech Entrepreneur · Product-Market Fit · core

Also known as: default alive, default dead, Paul Graham default alive

Default alive asks: if growth and burn continue as-is, does the company become profitable before cash runs out? If yes — default alive, fundraising is optional leverage. If no — default dead, and survival requires growth acceleration, expense cuts, or outside money on a deadline. (Paul Graham’s framing; the math is just growth-vs-burn projection.)

compute:  project revenue growth + expense growth → crossing point vs cash-out date
alive:    crossing before cash-out (options open) · dead: cash-out first (clock ticking)

It reframes runway from passive countdown to active verdict: the question is never just “months left” but “what must change, by when, for the lines to cross in time?” That turns fundraising from identity (“we raise every 18 months”) into contingency (raise to accelerate, not to survive — when possible).

The classic mistakes:

Never computing it. Teams tracking burn and growth separately never confront their intersection. Run the projection monthly — the verdict changes behavior more than either input alone.
Fantasy growth inputs. Projecting 15% monthly compounding because the model needs it. Base growth on trailing evidence with scenarios (scenario analysis), not wishes.
Treating “alive” as safe. Default alive with two months’ margin is alive the way a tightrope walker is balanced. Margin size matters as much as the verdict — target comfortable aliveness, not technical.
Treating “dead” as doomed. Default dead with growing revenue and a fundable story is a normal startup state — it just means the plan requires a raise or a turn, scheduled deliberately rather than discovered in panic.
One computation, filed away. Growth rates, burn and cash move monthly; verdicts expire. Recompute with every monthly close and put it in front of the whole leadership team.

The uses: fundraising timing (raise from alive, not from fumes), expense courage (cuts validated by math, not fear), and honesty rituals — a team that knows its verdict makes better trade-offs everywhere.