My Startup Is Running Out of Cash: What to Do Now
Take a breath. You're not alone—most startups face this moment. What matters now is what you do next. This guide walks you through the immediate actions, tough decisions, and options available when your runway is short.
Step 1: Assess the Reality
Before you can fix the problem, you need to understand it precisely. Gut feelings aren't enough right now—you need exact numbers.
Calculate Your True Runway
< 3 Months
Crisis mode. Act now.
3-6 Months
Urgent. Start cutting now.
6+ Months
Plan carefully. Time to act.
Step 2: Immediate Actions (This Week)
These actions should happen within the next 7 days—regardless of your runway length.
Stop Non-Essential Spending
Freeze all discretionary spending immediately. That conference, the new tool, the team dinner—all on hold.
Review Every Subscription
Pull your credit card statements. Cancel or downgrade anything not essential to immediate operations.
Accelerate Receivables
Call customers who owe you money. Offer small discounts for early payment if needed.
Negotiate Payment Terms
Call your largest vendors. Many will extend payment terms if you ask—especially if you've been a good customer.
Create a Weekly Cash Report
Track cash daily and report weekly. You can't manage what you don't measure in a crisis.
Step 3: Cut Costs Strategically
Cutting costs is painful but necessary. The key is cutting strategically so you can still reach your next milestone.
Cut First
- Software you're not actively using
- Marketing spend with unclear ROI
- Contractor hours that can wait
- Office space upgrades or perks
- Travel and conference budgets
- Recruiting/hiring spend
Protect If Possible
- Core product team until layoffs necessary
- Customer success (retention matters more now)
- Critical infrastructure and security
- Essential sales capacity
- Key relationships and partnerships
If Layoffs Are Necessary
- Cut once, cut deep enough to reach your next milestone
- Be transparent and respectful—people remember how you treat them
- Provide severance if at all possible (2+ weeks is standard)
- Help with references and introductions to other companies
- Communicate clearly to remaining team—they need to know the plan
Step 4: Explore Funding Options
While cutting costs, simultaneously explore every funding option. Speed matters.
Existing Investors (First Call)
Your current investors have the most context and incentive to help. They don't want their investment to go to zero.
- Bridge round: A small round from existing investors to extend runway
- Convertible note: Quick to execute, minimal negotiation
- Terms: Be prepared to offer warrant coverage or discount
Revenue Acceleration
Non-dilutive cash is best cash. Can you accelerate revenue?
- Annual prepay discounts: Offer 2-3 months free for annual commit
- Pilot conversions: Push pilots to paid faster with incentives
- Upsells: Existing customers are cheapest to sell
- Price increases: If you haven't raised prices in a year, now might be time
Alternative Financing
Non-traditional financing can bridge the gap if you have revenue.
- Revenue-based financing: Clearco, Pipe, Capchase—fast if you have MRR
- Venture debt: If you've raised equity, lenders like SVB or Lighter Capital may extend credit
- Government grants: Takes longer but is non-dilutive (Ben Franklin, SBIR)
- Strategic prepayment: Can a large customer prepay for a year at a discount?
Step 5: Communicate Properly
How you communicate during a crisis affects your ability to get help and your reputation for years to come.
With Investors
- Be transparent about the situation early
- Come with a plan, not just problems
- Show you've already taken action
- Ask for specific help (bridge, intros, etc.)
- Update frequently during the crisis
With Your Team
- Be honest about challenges (they already know)
- Share the plan and ask for their help
- Don't make promises you can't keep
- If layoffs are coming, do them quickly and clearly
- Celebrate small wins during tough times
If Things Don't Work Out
Sometimes, despite best efforts, the math doesn't work. If you reach that point, here's how to wind down responsibly.
Responsible Wind-Down Checklist
- Pay employees first: Wages are legally protected and morally right
- Notify customers: Give them time to find alternatives
- Wind down contracts: Don't leave vendors hanging
- Document everything: For tax and legal purposes
- Consult a lawyer: Understand your obligations
- Explore acquisition: Even a small exit may be possible
Need Help Navigating This Crisis?
We've helped startups through cash crunches before. Let's talk through your situation and options—sometimes an outside perspective helps.
Schedule an Urgent Call