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yc-default-alive-calculator

yc-default-alive-calculator

Evaluate startup runway, burn, revenue, and profitability trajectory using the Default Alive / Default Dead framework. Do not use this skill for weekly growth experiments or operating growth decisions; use `yc-weekly-growth-compass` for those decisions.

Independent GitHub snapshot · Automated classification · Original documentation governs

Skill-Dokumentation

GitHub

name: yc-default-alive-calculator description: >- Evaluate startup runway, burn, revenue, and profitability trajectory using the Default Alive / Default Dead framework. Do not use this skill for weekly growth experiments or operating growth decisions; use yc-weekly-growth-compass for those decisions. license: MIT compatibility: Python 3.9+ with standard library only (no external dependencies). The default-alive.py script uses only math, json, and sys. metadata: spec-version: '1.0' tags: startup-finance, runway-analysis, ycombinator, paul-graham, fundraising, financial-modeling, default-alive, burn-rate, startup-metrics sources: https://paulgraham.com/aord.html, https://paulgraham.com/die.html, https://www.ycombinator.com/about skills: yc-weekly-growth-compass requires-toolsets: terminal

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

TriggerExample
"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 MultipleSignal
< 1xDefault Alive — growing efficiently
1x–2xHealthy — capital-efficient growth
2x–3xWarning — 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

FlagDescriptionExample
--monthly-revenueCurrent monthly recurring revenue (MRR)50000
--monthly-burnTotal monthly operating expenses120000
--cash-on-handCash remaining in bank account800000
--monthly-growthMonth-over-month revenue growth rate (%)8

Optional inputs

FlagDescriptionExample
--revenue-growth-decelerationAnnual growth deceleration rate (%/month, default: 0.5)0.3
--jsonMachine-readable JSON output
--verboseShow detailed month-by-month projection

Output fields

FieldMeaning
projected_cashout_monthMonth cash runs out under the model; null if never within the 10-year projection
burn_multipleGraham's burn multiple: net burn ÷ net new ARR
burn_to_revenue_ratioNet burn ÷ MRR (secondary diagnostic, not Graham's metric)
months_to_breakevenMonths until revenue ≥ expenses (extrapolated)
default_verdictALIVE, DEAD, or MARGINAL
revenue_at_breakevenProjected revenue when/if breakeven reached
gap_to_breakevenMonthly shortfall remaining
months_of_gap_remainingStatic runway at current spend: cash ÷ monthly gap
model_assumptionsfixed_burn_pct, variable_burn_ratio, growth_decay_pct, projection_cap_months, safety_buffer_months
leversWhat 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):

  1. Revenue growth — 10% faster growth compounds dramatically over 18 months
  2. Cost reduction — Every dollar cut extends runway by one dollar
  3. Pricing — A 20% price increase with minimal churn impact is often the fastest lever
  4. Gross margin — Reducing COGS improves unit economics without topline change
  5. 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 excerpts
  • references/yc-fundraising-context.md — How default state drives fundraising strategy
  • yc-weekly-growth-compass companion skill — For growth rate analysis
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