Dear founder,
With the macroeconomic environment as volatile as it is, many of us are faced with tricky decisions about how to best run our businesses. In situations like this, I’ve always found the wisdom of the crowds useful. What are other people doing? What do their growth rates look like? How are they thinking about office space? How do we compare?
We thought it would be helpful to share some of that aggregate data, and so we present you Pilot’s State of Startups report, 2023 edition.
We surveyed founders from around the world, and here are our findings. I’m hoping you find it useful.
If you have any feedback on this report (or suggestions for next year), please get in touch!
Thanks,
Waseem Daher
Pilot CEO & Co-Founder
Despite operating in a tough economic environment, the majority of startup founders have a positive outlook on 2023. They expect 2023 revenue growth to be strong, and, broadly, they don’t expect to conduct layoffs or cut costs in any departments.
Time will tell whether or not this optimism is warranted.
Seed Stage Founder, Southern California
Although founders are optimistic about their startups, most are less optimistic about 2023 revenue growth expectations. Median 2023 revenue growth expectations are less than half of that of 2022, with the median startup expecting to 2x revenue (vs. 4.9x in 2022).
Unsurprisingly, founders are taking a much more conservative tack when it comes to headcount growth. 2023 headcount growth is expected to be about half of that of 2022, with the median startup only growing by ~30%.
Despite the headlines, our surveyed startups are not expecting to conduct layoffs. About 60% of companies feel that it's extremely unlikely that they will conduct layoffs this year. Smaller startups are less likely than mid-sized startups to consider layoffs. Specifically, startups with <10 FTEs are 34% less likely to consider layoffs this year than those with 11-50 full-time employees.
However, in practice, founders are taking a more measured approach. About half of founders were instead considering more moderate reductions in their workforce.
If Conducting Layoffs, Percentage of Headcount That Would be Affected
Series A Founder, San Francisco Bay Area
After years of a bull market with record-setting fundraising rounds and valuations, many of the surveyed startups are well-capitalized in 2023, with about half having more than 12 months of runway.
Of startups have over 12mo of runway
Of SF Bay Area startups have over 12mo of runway
Total Runway
The majority of founders are optimistic that the funding environment will recover within the next 24 months, with 75% expecting recovery by Q2 2024.
Although VC fundraising velocity and capital deployment has slowed, about half of startups remain optimistic that the fundraising environment will recover in time for their fundraise.
Colorado-Based Startup Founder
Despite media coverage of companies significantly cutting back on spending, most startups have no plans to reduce their level of investment. Almost half of founders aren’t planning to cut back on spending at all.
Areas Startups Plan to Cut
In tougher macroeconomic times, most founders are going back to the basics and focusing on the main drivers of their businesses: sales, R&D, and marketing.
Founders are also focused around driving growth and profitability through streamlining operations and managing burn.
Priority Areas
New York-Based Startup Founder
The majority of startups have opted out of traditional office space, in favor of more flexible/remote working arrangements.
Do not have an office location
Of those with offices have required in-person days
Of Those With Office Locations, Number of Days Required in Office Per Week
Team offsites continue to remain important due to an increasingly decentralized work environment. Approximately 60% of founders plan to host an offsite in 2023.
Founders are also focused around driving growth and profitability through streamlining operations and managing burn.
We hope this report gives you a good sense of how your peers are approaching some of the decisions they are facing today and that it can serve as a useful guide as you face similar decisions.
If there’s anything we at Pilot can do to help out, please get in touch. We’re the largest startup-focused accounting firm in the US, and we have a robust CFO services practice area. The team is especially good at helping you think through tricky strategic questions, and we’d be happy to chat.
We’re rooting for you!
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