Room to breathe: Extending your runway

As you are no doubt aware, it’s currently a tough fund raising environment. Less capital is being allocated to venture overall, and most of that is getting pulling into the strong gravity of excitement about AI. Switching to decarbonised processes and products no longer seems to be a top priority for many businesses, so you as a company also need to demonstrate clear economic and ideally strategic benefits, like energy security and supply chain on-shoring.

This all means that the goal posts have shifted significantly - the number of customer traction proof-points that you are expected to hit at every stage of your development has increased, and you may find that you don’t have enough money in the bank to fund what you need to do to secure investment for the next round. It’s worth emphasising that this is probably the case for every business. Even if you think you are in a good place at the moment, you may not have enough contingency for the next twist in the road.

One obvious option is to raise a bridge round, but this is probably only viable if you have well-funded and understanding investors already on board. It is very hard to get new investors into a bridge unless you are doing something very exciting indeed. Most investors we speak with are feeling a bit ‘bridged out’ right now, and are raising the bar considerably on getting the chequebook out without a new lead investor. You may find that any bridge comes with difficult requirements and conditions.

Another option is to look for non-dilutive funding opportunities, and we’re going to assume here that you have already explored and applied for all grants and loans available to you.

We highly recommend taking runway-extending measures in any case, whether or not you try to supplement this with a bridge or grants. Here are some pointers to get started:

1. Start early

   The earlier you start, the more likely it is that you can make a significant extension to your runway. If you’ve only got a month left, the most you can hope to squeeze out is another week.

   
   

2. Be really, really clear on your goals

   Whatever your milestones were at your last fundraise, it’s worth revisiting these with your investors and other stakeholders. Make sure they still represent the absolute priorities for your business - the core achievements to unlock a significant value inflection point. Strip them down until they represent the minimum ticket to landing a lead investor for your next round. What are the non-negotiable areas for you to derisk? If you aren’t sure, ask some friendly later-stage investors what milestones they would want to see for your business hit to be ready for the next round.

   
   

3. Reconsider your go-to-market plan

   Rather than building a First of a Kind facility, have a hard think about whether there may be more capital-effective options open to you to demonstrate and scale your technology. You can always bring production in-house later on to reduce costs once you have demonstrated your product works and customers want it. Could you partner with a corporate who will co-fund a pilot, or go straight to a licensing or engineering services model? Can you stay with contract manufacturing for longer?

   
   

4. Remake your project plan

   Now you know exactly what you need to achieve, go back to your project plan and remake it from the ground up to execute against it. Don’t sneak in nice-to-have extras at this point. If you don’t achieve the core goals, your company is dead. Remember to lead time for fundraising, and remember this is taking longer than it used to.

   
   

5. Remake your people plan

   People are probably your biggest expense, so this is your biggest lever.

   Be brutal. Which hires can you postpone? What will the impact be? It’s better to have to reallocate or retrain someone now, than bring on new people and have to make them redundant - this is very expensive, time-consuming and unsettling for your team. If you need new skills, can you buy them in for a shorter amount of time on a project or contract basis?

   Really brutal. Do you really need everyone you currently have on the team - are they all instrumental to your achieving the core goals? Question everyone - even founders, advisors - this is not a time to be carrying anyone who is not performing. If you had to do without one person, who would it be? How about the second? What difference would this make to the staffing costs?

   Really really brutal. Are you in a position to consider founder salary sacrifice? In extreme cases, founders moving to minimum wage or postponing salaries can signal serious commitment to existing and incoming investors.

   
   

6. Do the same with the rest of your budget

   Remake the budget to fit your new, leaner plan. Question all of your other costs:

   • Can you avoid it? Do you really need this to achieve your goals or can you manage without this equipment/membership/subscription?

   • Can you reduce it? See if you can strike a deal - get a discount, buy second hand.

   • Can you delay it? Beyond just asking for discounts, you can try to negotiate "milestone-based payments" with suppliers. Instead of 50% upfront, aim for 10% upfront and the rest upon delivery or even 30 days post-delivery. This keeps cash in the bank longer.

   • Do you need to own it? Could you instead hire or borrow capacity from another company or research centre. Sharing equipment could also be an option.

   • Can you finance it with non-dilutive capital? Explore equipment loans or other asset financing options - debt secured against the equipment.

   Caveat: don’t fall for false economies. For example, by all means scale down the budget for your team fun evening, but consider the impact on morale if you cancel it.

   
   

7. Look for ways to increase revenues

   • Your next investor will only be interested in revenues which directly support future commercial engagements, so don’t waste time on consultancy gigs which take away key people from achieving your goals unless you are desperate.

   • If you are already engaged with customers, can you realise or bring forward revenues from them? Ask them to pay for samples, or put down a deposit to secure a priority position in your delivery queue. Ask them for more favourable payment terms.

   • Consider other ways you could sweat your assets which would not interrupt your core progress too much. Could you sublet your equipment or space to someone who needs flexibility?

   
   

8. …Or bring them forward

   If you you are lucky enough to have grant money coming in from public sources, it’s likely that you don’t get paid until some time after you have incurred the actual expense. If the cash flow gives you issues, you can secure loans agains R&D tax credits or grants from IUK and other public bodies.

   Alternatively if you have committed revenues coming in, you may be able to secure a loan against that as collateral. This is called invoice factoring where you have an invoice issued to a customer with a strong credit rating but slow payment terms.

   
   

9. Look for working capital flexibility

   Some business bank accounts offer an overdraft function. Some investors may be able to issue short-term loans on commercial terms to give you breathing space.

   Remember that taking on debt is not necessarily the best idea for every company, and may create issues at your next round if it is still outstanding - ideally, have revenues lined up to pay off any debt quickly, and limit it to a small proportion of your net assets.

   
   

10. Keep the pipeline warm

    Think about ways to reduce the amount of time it’s going to take to close your next fundraise. Keeping a small number of potential lead investors warm even when you are not officially raising could reduce the amount of time you need to close. In this tough environment, the closing period has stretched from 3 months to 6-9 months - after you’ve got a term sheet.

In the current climate, extending your runway is no longer a sign of distress - it is a sign of operational excellence. Surviving this period requires a clinical, almost dispassionate look at your burn rate, stripping away every ‘nice-to-have’ until only the core value proposition remains. By acting early, tightening the belt on headcount, and creatively leveraging non-dilutive options like invoice factoring or asset financing, you aren't just delaying the inevitable; you are buying the time necessary to prove your company. The companies that survive this funding winter won't just be the ones with the best tech and teams, but the ones with the most disciplined command over their cash.