When Cash Runway Dwindles: Advice for Boards of VC-Backed Companies

When Cash Runway Dwindles: Advice for Boards of VC-Backed Companies

G2’s Nate McOmber shares practical guidance for navigating uncertainty and safeguarding fiduciary duties.

In a recent webinar hosted by the National Venture Capital Association (NVCA) and co-sponsored by G2 Capital Advisors and Latham & Watkins, a panel of experts explored what board members can—and must—do when portfolio companies face financial distress. G2 Managing Director Nate McOmber, a seasoned restructuring advisor who in a former life served on the management teams of two venture-backed companies, brought a unique perspective to the conversation.

Drawing both from his own startup stint and subsequent wealth of experience helping hundreds of venture-backed companies navigate distress, McOmber emphasized the importance of preparing for multiple outcomes simultaneously.

“In my experience as an operator at a VC-backed company, we parallel-pathed a capital raise and sale process, but also explored a third prong—what does insolvency look like? What’s an ABC? How do we respond if the bank opts to foreclose?”

This kind of proactive thinking, he explained, is crucial to prepare for all eventualities. Aligning stakeholders around available options early can offset the element of surprise down the road. Such contingency planning naturally requires a hard look at the numbers.

“Often management teams don’t appreciate the need to set aside a sacred reserve.  This is cash that cannot be touched in normal course. The runway should be thought of as ending when that reserve is all that remains. The reality is many companies charge ahead until cash out, and then they start to explore options—which at that point are very limited. If you have cash equivalent to 3 months of spend, you really don’t have 3 months of runway, because an orderly wind down requires funds for final payroll and other statutory obligations, a D&O insurance tail policy, advisor fees, and wind down costs.”

Beyond scenario planning and cash preservation, McOmber highlighted the need for experienced, steady guidance during periods of instability—something only a battle-tested advisor can provide.

“Bringing in an advisor who has scar tissue from past experience and can leverage pattern recognition in your behalf is vital.”

The key takeaways for board members? 

1. Prioritize cash preservation (e.g., delay non-essential spending, reduce headcount, pause growth initiatives)
2. Communicate transparently with stakeholders (builds trust and can expand options)
3. Contingency plan with experienced advisors (e.g., assess and budget for options beyond your plan A, including an accelerated sale process, recapitalization, ABC)

By planning for the worst while pursuing the best, boards can better fulfill their fiduciary duties—and safeguard both enterprise value and personal liability.

Whether your company is in a period of growth or facing challenges, G2 Capital Advisors is here to help. Our team specializes in navigating both strategic opportunities and distressed situations with a hands-on, relationship-driven approach. We serve distressed venture-backed companies as assignee in an assignment for the benefit of creditors (“ABC”), financial advisor in a restructuring, or investment banker in an accelerated M&A process. To learn more about how we help companies facing financial and operational distress, visit our Insolvency & Fiduciary Services page, or contact us to start a conversation.