Unit Economics
Default Alive vs Default Dead
Default alive describes a startup that will reach profitability on its current trajectory before the money runs out. Default dead is one that will not, unless something changes. The terms come from Paul Graham.
Also known as: default alive, default dead
Why it matters
This is the single most clarifying question a founder can ask: on current growth and spending, do we make it? Most founders avoid the math because the answer is often default dead, and that is exactly why it matters. Knowing early gives you time to fix it by cutting burn, raising prices, or growing faster. Knowing late means you find out when the account hits zero.
Formula
Project monthly revenue forward at your current growth rate against a steady burn. If revenue covers expenses before cash runs out, you are default alive. If not, default dead.
Worked example
Growing revenue 10 percent a month against fixed burn, with enough runway to cross over: default alive. Flat revenue and shrinking cash: default dead.
Common mistakes
- Assuming a future fundraise will save you. That is not a plan, it is a hope.
- Confusing slow growth with safe growth. Flat is default dead in disguise.
- Only checking once. Re-run it whenever burn or growth changes.
Frequently asked questions
What does default alive mean?
It means that on your current growth and spending, you will reach profitability before your cash runs out, without raising more money. You are alive by default. The opposite is default dead.
How do you know if you are default alive or default dead?
Project your current revenue growth against your burn and runway. If revenue covers expenses before cash hits zero, you are default alive. If not, you are default dead unless something changes.
Who coined default alive versus default dead?
Paul Graham of Y Combinator, in a 2015 essay. He argued every founder should know which side of the line they are on, and that most underestimate how easily they drift to default dead.
What should you do if you are default dead?
Act early: cut burn, raise prices, or accelerate growth, and do not assume a future raise will save you. The earlier you know, the more options you have. Waiting removes them.
Why do founders avoid this question?
Because the honest answer is often default dead, and that is uncomfortable. Avoiding the math does not change reality, it just delays the response until it is too late. The discomfort is the point.
Can a default dead company become default alive?
Yes, by changing the trajectory: growing faster, cutting costs, or both. Many great companies were default dead at some point and fixed it. The key is recognizing it while you still have runway to act.
Related terms
More in Unit Economics
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Last updated 2026-06-02 · Back to the glossary