Paul Graham's question for founders is brutal because it is binary: if revenue keeps growing at the current rate and expenses stay flat, do you reach profitability before the money runs out? If yes, you are default alive. If no, you are default dead, and everything you do runs on a timer.
Most founders do not know their answer. Not because the math is hard, but because the question is uncomfortable. Answer it anyway. Every serious decision, hiring, fundraising, pricing, is a different decision depending on which side of the line you are on.
The calculation
You need four numbers you already have:
- Cash in the bank
- Monthly expenses (flat, no planned hires)
- Monthly revenue today (for a subscription business, your MRR)
- Monthly revenue growth, as an absolute number, averaged over the last three months
Then project forward month by month: revenue grows by the average step, expenses stay flat, and the gap between them drains or feeds the cash. Two things can happen first: revenue crosses expenses (alive), or cash crosses zero (dead).
A worked example
Cash €120,000. Expenses €30,000 a month. Revenue €18,000, growing about €2,000 a month.
| Month | Revenue | Net burn | Cash left |
|---|---|---|---|
| Now | €18,000 | €12,000 | €120,000 |
| 3 | €24,000 | €6,000 | €93,000 |
| 6 | €30,000 | €0 | €84,000 |
| 7 | €32,000 | +€2,000 | €86,000 |
Breakeven in month six with €84,000 to spare: default alive. The same company growing €1,000 a month instead crosses zero cash in month nine, three months short of breakeven: default dead, with the same product and the same team. Growth rate is the whole difference.
If you are default alive
Congratulations, and be careful: the status is fragile and every new commitment re-asks the question. The discipline is simple. Before any hire or spend increase, rerun the projection with the new expense line. Alive-to-dead is one enthusiastic quarter of hiring; nobody notices at the offsite.
Being default alive also changes your fundraising posture completely. You can raise, but you do not have to, and rounds negotiated by companies that do not need money are famously better. If you do raise, size the round in months, not in ego.
If you are default dead
You have three levers, and honesty about them beats optimism:
1. Grow faster. The best lever and the least controllable one. If you choose it, name the mechanism: what specifically will add more revenue per month than the current average, and by when will you see evidence?
2. Cut to alive. Compute the expense level at which your current growth reaches breakeven before zero, and decide whether the company still works at that size. A smaller alive company beats a larger dead one every time it is tried.
3. Raise, with a deadline. Fundraising is a valid lever with one rule: subtract six months from your run-out date, and treat that as the day the raise must be closed, because that is what a raise takes when it goes well. Past that day, you are executing lever two whether you planned it or not.
Check it monthly
The answer changes with every price change, churn event, and hire, so it belongs in your monthly business review, next to burn and runway. The projection behind Plainhub's runway view runs this continuously, but the tool is optional; the habit is not.
Default dead is survivable. Plenty of great companies passed through it. What kills is not the status, it is not knowing, because every lever above works better with more months on the clock, and the clock only shows itself to founders who look.