Is your startup default alive, or default dead?

Core Concept: "Default Alive" vs. "Default Dead"

• The framework, attributed to YC co-founder Paul Graham, establishes a binary reality for startups: either they are "default alive" or "default dead" with no intermediate state.
• The metric forces founders to confront the binary question: "If I raise no more money, will I go out of business?"

Definitions and Financial Mechanics

• Default Alive: A startup burning money today but maintaining a revenue growth rate sufficient to become profitable before its cash reserves are depleted.
• Default Dead: A situation where the startup's current cash burn rate exceeds its ability to reach profitability before funds run out.
• Profitability: Defined strictly as the state where monthly revenue covers expenses, causing the bank account to grow every month.
• Distinction: A company can be "default alive" while currently unprofitable, provided its growth trajectory ensures survival without external capital.

Founder Psychology and Adoption

• Founders frequently ignore this reality due to the social awkwardness of discussing potential business failure.
• Adopting the framework is intended to compel honesty regarding a startup's runway and financial sustainability.