Definition · also called default dead
A startup is default alive if, assuming expenses stay flat and revenue keeps growing at its recent rate, it will reach profitability with the money it has left. It is default dead if, under the same assumptions, it runs out of cash first.
Paul Graham coined the framing in his October 2015 essay Default Alive or Default Dead?, arguing that many founders don't know which one they are. (source)
How to check in five minutes
- Write down cash in the bank, monthly costs, current monthly revenue and your average monthly revenue growth over the last 3–6 months.
- Project revenue forward month by month at that growth rate, holding costs flat.
- If revenue crosses costs before cumulative losses exceed your cash, you are default alive.
A bootstrapped product that already covers its costs is default alive by definition, which is one reason many indie makers optimize for ramen profitability early.
Default alive in practice: how indie makers use it
Indie makers rarely use the phrase, but most build businesses that are default alive from the start:
Describes OnlineOrNot as a self-funded, default-alive lifestyle business, built alongside a full-time job and kept free of venture capital. (sources: onlineornot.com, maxrozen.com)
Publer reached breakeven in August 2021 after a near-death 2018, which moved the company from default dead to default alive without outside money. (source: publer.com)
Buffer bought out its venture investors, choosing profitability and independence over raising more, documented by the founder. (source: joel.is)
Frequently asked questions
What does default dead mean?
A startup is default dead if, with costs flat and revenue growing at its recent rate, it would run out of money before becoming profitable.
Who coined default alive?
Paul Graham, in his October 2015 essay “Default Alive or Default Dead?”.
Is a bootstrapped company always default alive?
Not automatically. A bootstrapped company that spends savings faster than revenue grows can still be default dead. Once revenue covers costs, it is default alive.
Related terms
Keep reading
Maker examples are paraphrased from the cited sources and from each maker's IndieMakerList profile; revenue is self-reported unless marked verified. Spotted an error? Tell us.