The Question
When PG talks to a startup that's been operating for a while, he asks one thing first: assuming expenses stay constant and revenue growth continues at its recent rate, does the company reach profitability on the money it has left? If yes, it's default alive. If no, it's default dead.
The startling part isn't the question. It's that half the founders he asks have no idea what their answer is. They're flying a plane without knowing whether it's climbing or descending.
You don't need precision to get the answer. Trevor Blackwell's calculator (referenced in the essay) does it from a handful of inputs. The point is to know which side of the line you're on, because everything else you decide should depend on it.
“Half the founders I talk to don't know whether they're default alive or default dead.”
Key idea
Default alive: current growth and current expenses get you to profitability on existing cash. Know your answer at all times, because half of founders don't.