Startup founders remain optimistic about the rest of year despite the lingering tech and funding downturn, according to a report.
San Francisco-based accounting services startup Pilot surveyed over 500 startups at the beginning of 2023, around half of which were at the seed stage, and released a report on Tuesday on the "state of startups."
The survey found that most companies expected revenue growth to continue this year, though at about half the rate of 2022.
Last year's median revenue growth was nearly 5X, and that is expected to drop to 2X, according to the report.
More than three-quarters of the respondents also said layoffs were unlikely this year at their companies. But hiring appears to be slowing down, with median headcount growth of 20% to 50% expected this year, with smaller companies hiring at faster rates.
Mid-sized startups were more likely to say they would consider layoffs than smaller startups.
Many startups also have plenty of capital to get them through the year, particularly if they raised fresh funding over the past couple of years before venture capital firms started pulling back amid interest rate increases and a public tech stock rout.
Around half of startups have more than 12 months of runway, the report said, including 7% of startups which have reached profitability.
A lot of the optimism comes from the hope that the funding environment will improve as early as the second quarter of 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," one founder told Pilot.
Startups that are trying to cut down on spending are most likely to reduce costs in areas like business-related travel, marketing and office space.
And they are focusing their spending on "going back to the basics," the report said, with sales, research and development, and marketing being categories where startups are likely to focus spending.
