Investors have been warning startups in their portfolios to control costs and slow down burn rates since early last year amid rising interest rates and broad economic uncertainty, and a new report shows some of the subtle ways in which companies are shifting their spending.
On Wednesday, Brex published its 2022 "Startup Review" which dives into its own customer data to get a bird's eye view of the financial landscape surrounding startups. The report shows an overall reduction of spending as well as a noticeable shift away from Facebook advertising as startups look to maximize the impacts of their digital marketing strategies elsewhere.
A later-stage startup itself (and based in San Francisco before joining the no-HQ crowd), Brex provides financial services to startups including credit cards, forecasting and spend management.
The company found that while early-stage companies continued to spend at relatively steady levels over the past six months. However, later-stage companies have been reining in their costs more noticeably.
In its report, Brex defines seed stage as inclusive of angel investments, early-stage as a startup that has raised a Series A or B round, and later-stage as Series C or D.
Overall, startups across seed, early-stage and later-stage funding levels have been moving their advertising strategies away from Facebook and shifting more of their budgets to Google and Amazon since early 2020 through late 2022, according to Brex's data. Early-stage was the only group that actually increased spending on Facebook.
And last year alone, startups jumped on TikTok more than ever, most dramatically from later-stage companies which started 2022 with close to zero spend on TikTok and grew their advertising spend on the platform by nearly 600%.
Later-stage companies also increased their spend by 93% on Amazon, 40% on Pinterest, 8% on Microsoft and 5% on Google, while their spend decreased by 83% on Snapchat, 25% on Facebook and 25% on Apple.
Seed and early-stage startups also increased their spend on TikTok and Amazon advertising, though not quite as dramatically.
At the seed stage, startups grew their advertising spend on TikTok by 139%, Amazon by 133% and Snapchat by 27%, while decreasing their spend on Microsoft by 52%, Pinterest by 46%, Apple by 20% and Facebook by 1%.
Early-stage companies leaned more towards Amazon, growing their advertising dollars on the e-commerce giant by 64% while also growing on TikTok by 58%, Facebook by 16% and Snapcat by 8%. Spending at this stage declined on all other major online platforms with Apple dropping the steepest at 42%.
You can read Brex's full 2022 "Startup Review" here
