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
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.
Seed Stage Remote Founder
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.
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, all startups with <10 FTEs are 36% less likely to consider layoffs this year than those with 11-50 full-time employees.
However, in practice, YC founders are taking a more measured approach. About half of founders were instead considering more moderate reductions in their workforce.
Seed Stage Remote Founder, W21
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 under 12mo of runway
Of SF Bay Area startups have over 12mo of runway
Total Runway
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.
Preseed Utah-Based 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 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
Seed Stage Remote Founder
The majority of YC 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.
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!
gillian.obrien@pilot.com
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