# State of Startups 2023 Edition

## Welcome to our State of Startups report

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.

Thanks,

Waseem Daher  
Pilot CEO & Co-Founder

## Overview

## Startup Outlook

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.

74%  
are optimistic about their startup’s outlook

## “Winning formula is still the same: excellent team, huge space”  
Seed Stage Founder, Southern California

## Growth Outlook

### Revenue Growth

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).

| Year   | Mean | Median |
|--------|------|--------|
| 2022   | 4.4x | 4.9x   |
| 2023   | 1.4x | 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%.

| Year   | Mean | Median |
|--------|------|--------|
| 2022   | 0.94x | 0.68x |
| 2023   | 0.77x | 0.33x |

Most startups do not expect layoffs, and about 60% feel that it's extremely unlikely that they will conduct layoffs this year.

77%  
of startups don’t expect layoffs this year

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

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

| Range       | Percentage |
|-------------|------------|
| 0 - 10%     | 39%        |
| 11 - 20%    | 29%        |
| 21 - 30%    | 5%         |
| 31+ %       | 26%        |

## “Growth is below plan / expectation, but path to profitability feels very attainable”  
Series A Founder, San Francisco Bay Area

## 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.

50%  
Of startups have over 12mo of runway

Total Runway

| Range       | Percentage |
|-------------|------------|
| 0 - 6mo     | 21%        |
| 6 - 12mo    | 23%        |
| 12 - 18mo   | 13%        |
| 18 - 24mo   | 15%        |
| 24+ mo      | 21%        |
| Profitable   | 7%         |

### Fundraising Recovery Expectations

The majority of founders are optimistic that the funding environment will recover within the next 24 months, with 75% expecting recovery by Q2 2024.

## “We think an impending recession will narrow the herd, and give us more opportunity to execute our strategic plan, with less competitors in the field.”  
Colorado-Based Startup 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

| Area                     | Percentage |
|-------------------------|------------|
| Business Travel         | 22%        |
| Marketing               | 17%        |
| Office Space/Real Estate| 13%        |
| Engineering/Product/Design| 13%      |
| Legal                   | 10%        |
| HR/People              | 9%         |
| Sales                   | 5%         |
| Customer Success        | 5%         |
| Finance                 | 2%         |

### Areas to Invest

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.

Priority Areas

| Area         | Percentage |
|--------------|------------|
| Sales        | 33%        |
| R&D          | 33%        |
| Marketing     | 18%        |
| Customer      | 7%         |
| Finance       | 2%         |
| Human         | 3%         |
| Other         | 4%         |

## “Chaos equals opportunity”  
New York-Based Startup Founder

## Other Helpful Benchmarks

### Return to Office

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

56%  
Do not have an office location

### 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.

| Frequency       | Percentage |
|----------------|------------|
| Monthly        | 3%         |
| Quarterly      | 32%        |
| Yearly        | 26%         |
| Variable      | 9%         |
| None in 2023   | 29%        |

## Thanks for reading!

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!