Definition
A startup is default alive if, with expenses held flat and revenue growing at its current rate, it becomes profitable before running out of money. If not, it's default dead: it needs to raise money, cut costs, or grow faster to survive. Paul Graham popularised the terms in a 2015 essay.
How to check
You need cash in the bank, monthly revenue, monthly expenses and your recent monthly revenue growth rate. Then step forward month by month: subtract the month's net burn from cash, grow revenue by the growth rate, and repeat. If revenue passes expenses before cash reaches zero, you're default alive.
Example
$200,000 in the bank, $10,000 monthly revenue growing 10% a month, $20,000 monthly expenses. Revenue passes expenses in month 9 with roughly $155,000 left: default alive.
The same company growing 1.5% a month runs out of cash around month 26, long before revenue catches up: default dead.
Why it's useful
Runway alone assumes revenue is frozen. Default alive combines runway and growth into one question with a yes-or-no answer, and tells you whether fundraising is a choice or a necessity.
Common mistakes
- Using hoped-for growth instead of the real recent rate.
- Assuming the next funding round is guaranteed.
- Checking once instead of every month as growth changes.