In light of the recent state of the economy and concerns surrounding a potential bubble-burst in the startup world, it may be surprising to discover that startups are actually faring better than one might expect. Through my conversations with various founders who are struggling to secure funding, it’s clear that there are some startups who are focusing on key business principles and thriving as a result.
A detailed examination of data from startup accounting firm Kruze Consulting reveals that those startups who prioritize fundamentals – those that run more like a “real” business instead of the “growth at all costs” mindset that has dominated in recent years – are in a relatively stable position. When looking at the numbers, this is reflected in a notable increase in median runway length, a decrease in operating expenses, and a promising rise in profitable revenue.
“The average burn is decreasing this year, attributed to lower spending on operating expenses. This shift reflects founders’ efforts to be more efficient,” shared Healy Jones, VP of Financial Strategy at Kruze Consulting. “Of course, much of this is due to layoffs that have made headlines (something not to boast about), but at the same time, it shows that founders are learning to be more effective in managing their cash flow, which bodes well for the overall ecosystem.”
The median runway for startups – which represents the estimated amount of time a company can sustain operations before running out of cash – has actually increased in the latter half of 2023, now standing at an impressive 12.5 months. This is a significant improvement compared to the usual nine to 10 months following an average funding round.
It’s clear that while some startups may be facing challenges in securing funding, there are others who are thriving by prioritizing sound business principles. Amidst economic uncertainties, it’s encouraging to see that there are startups who are finding success by focusing on the fundamentals.
