Report

State of Startups YC 2023 Edition

Presented by

Welcome to our State of Startups report

Hi YC founders,

With the macroeconomic environment as volatile as it is, startups have been facing tricky situations and hard decisions. YC/Bookface is a community that leans on the wisdom of the crowds, and my goal with creating this report was the same. I wanted to help answer the questions: what are other yc founders doing? What do their growth rates look like? How are they thinking about office space?

I thought it would be helpful to share some of that aggregate data, and so here's the State of Startups report, YC 2023 edition.

We surveyed founders from around the world, and layered in how yc companies are different.

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,
Gillian

Overview

Startup Outlook

Despite operating in a tough economic environment, the majority of YC 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.

75%
are optimistic about their startup’s outlook
0%
5%
21%
64%
10%
Extremely Pessimistic
Pessimistic
Neutral
Optimistic
Extremely Optimistic

“Our market is growing, and we have traction in our market for now”

Seed Stage Remote Founder

Growth Outlook

Revenue Growth

Although YC founders are optimistic about their startups, most are expecting more moderate growth in 2023 than what they experienced in 2022. Average 2023 revenue growth expectations are a third of 2022, while the median 2023 revenue growth multiple is the same as that of 2022.

2022
Mean
10.3x
2022
Median
2.0x
2023
Mean
3.3x
2023
Median
2.0x

Headcount Growth

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%.

2022
Mean
1.22x
2022
Median
1.00x
2023
Mean
0.56x
2023
Median
0.33x
2022
Mean
1.15x
2022
Median
1.00x
2023
Mean
0.54x
2023
Median
0.33x
2022
Mean
1.29x
2022
Median
1.00x
2023
Mean
0.74x
2023
Median
0.33x
2022
Mean
0.77x
2022
Median
0.23x
2023
Mean
0.77x
2023
Median
0.11x
*Multiples represent headcount growth
(ie: a 100 FTE company with 0.2x in headcount growth will add 20 people to their team)

Likelihood of Layoffs

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, all startups with <10 FTEs are 36% less likely to consider layoffs this year than those with 11-50 full-time employees.

90%
of startups don’t expect layoffs this year
64%
24%
5%
7%
0%
Extremely Unlikely
Somewhat Unlikely
Neutral
Somewhat Likely
Extremely Likely

Industry best practice advises making layoffs large — to minimize the chance that you have to do them again.

However, in practice, YC founders are taking a more measured approach. About half of founders were instead considering more moderate reductions in their workforce.

“Our growth rate is steady, the mindshare about our product is growing”

Seed Stage Remote Founder, W21

Fundraising Outlook

Runway

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.

22
%

Of startups have under 12mo of runway

70
%

Of SF Bay Area startups have over 12mo of runway

Total Runway

0 - 6mo
15%
6 - 12mo
7%
12 - 18mo
24%
18 - 24mo
12%
24+ mo
37%
Profitable
5%

Fundraising Recovery Expectations

The majority of YC 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, over 80% of YC startups remain optimistic that the fundraising environment will recover in time for their fundraise.

“Extended our runway and found a new line of business”

Preseed Utah-Based Founder

Investment Areas

Areas to Cut Spending

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

R&D
22%
Marketing
19%
Business Travel
17%
Legal
11%
HR/People
8%
Office Space/Real Estate
6%
Sales
6%
Customer Success
3%
Finance
3%
MOST LIKELY TO CUT
R&D
Business Travel
Marketing
LEAST LIKELY TO CUT
Finance
Customer Success
Sales

Areas to Invest

In tougher macroeconomic times, most YC founders are going back to the basics and focusing on the main drivers of their businesses: sales, R&D, and marketing.

YC founders are also focused around driving growth and profitability through streamlining operations and managing burn.

Priority Areas

90%
Are focusing on sales, R&D, or marketing
R&D
38%
Sales
35%
Marketing
18%
Customer
6%
Finance
1%
Other
2%

“We’ve kept things fairly lean so far and our industry is growing”

Seed Stage Remote Founder

Other Helpful Benchmarks

Return to Office

The majority of YC startups have opted out of traditional office space, in favor of more flexible/remote working arrangements.

52
%

Do not have an office location

40
%

Of those with offices have required in-person days

Of Those With Office Locations, Number of Days Required in Office Per Week

Plans for Team Offsites

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.

Monthly
2%
Quarterly
37%
Yearly
27%
Variable
10%
None in 2023
24%

Thanks for reading!

I hope this report gives you a good sense of how other YC companies are approaching some of the decisions you're facing, too.

As a former YC founder myself, I am passionate about and committed to helping others in the community however possible. I currently work at Pilot.com focusing on our YC customers — so if you need some extra time/help thinking through tricky strategic questions related to finances, please reach out!

[email protected]

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