Default Alive

Default Alive is Paul Graham's framework to assess whether a company will achieve profitability using only its current cash runway, without requiring further investment. It's a binary test: either you're default alive (you'll make it) or default dead (you'll need more capital or shut down).

The calculation is simple: divide your monthly burn rate by your monthly revenue growth. If your current cash reserves can cover the months until profitability, you're default alive. For example, if you have ₹1 crore in the bank, burn ₹20 lakhs monthly, and revenue is growing 10% month-on-month, you need to model whether you'll hit breakeven before the 50-month runway expires.

This concept inverts typical VC thinking. Instead of chasing growth at all costs, default alive startups prioritize unit economics and sustainable growth. It reduces founder desperation, improves decision-making, and shifts power away from investors. Many Indian B2B SaaS companies—especially in the ₹50–200 lakh ARR range—use this framework to avoid the trap of permanent fundraising.

In India, default alive becomes critical because of two factors: (1) early-stage runway expectations are shorter. Most Indian startups raise seed rounds of ₹50–100 lakhs, translating to 12–18 months of runway at typical Bangalore burn rates of ₹5–8 lakhs monthly. (2) Regulatory constraints. RBI guidelines on forex, GST filing requirements, and compliance costs directly impact burn rate calculations. A startup burning ₹10 lakhs monthly must account for ₹1–2 lakhs in compliance and tax overhead.

Many Indian founders mistakenly ignore profitability timelines because Series A capital is accessible. However, post-2022, VCs increasingly demand default alive metrics. Tier-2 and Tier-3 SaaS companies in Pune, Bangalore, and NCR that can demonstrate a path to breakeven within 24 months without Series A have significantly lower dilution in follow-on rounds.