Paul Graham · 2015 · 6 min
Default Alive or Default Dead?
The most important question a founder can ask: at current burn and current growth, will we make it to profitability before money runs out?
Key Takeaways
- 01Default alive: at current growth rate, you'll reach profitability before running out of cash. Default dead: you won't.
- 02Most founders don't actually know which side of the line they're on. PG estimates ~half of YC startups he meets are default dead and don't realize it.
- 03Default dead is fine if growth is accelerating AND fundraising is realistic. It's lethal if you're hoping it'll work out.
- 04Use a calculator: take current revenue, current growth rate, current burn — model 18 months. The truth shows up fast.
Distilled
PG noticed founders raising bridge rounds with no clear plan. They were burning $400k/month, growing 7%/month, and fundraising 'when the market improves.' That's not a plan; that's a prayer.
The fix is uncomfortable: cut burn until the math works, or grow faster, or accept that the next round needs to land before runway hits 6 months. There is no fourth option.
Why this matters in 2026: ZIRP is over. Bridges are harder. Founders who know their default-alive date have leverage. Those who don't, don't.
Source
paulgraham.com — Default Alive or Default Dead? →We summarize so you can decide whether to read the full piece. Always read the source for context.