SaaS products and services like Pilot track the finances of 1,000s of SaaS and other startup so they’re an interesting source of hard data.
What does Pilot’s latest data say? Something that’s both not surprising but also pretty impactful: 57% of venture-backed startups will have to go “back to market” in 2024 to raise more capital. And 38% have 12 or less months of runway left. Many have already raised a bridge round. And realistically, most won’t have the metrics to pull off another round.
This sounds a bit dire, but really it isn’t. VC finance is designed to fund 18-24 months of runway.
That’s how it works. VCs don’t give startups 10 years of capital. They typically give them just enough to see if it will work, and the startup grows and scales to the next stage. That’s typically been 18 months historically.
At a practical level though, the headlines in 2024 may actually look much worse than 2023 for startup failures. So many were able to cut the burn and stretch their cash through 2023. But you can only cut so much. Ultimately, you also have to grow again to raise more venture capital.
Folks that raised in the Go-Go Times of 2021 in many cases have been able to stretch their cash through 2023. But many will find 2024, those stretches have stretched as far as they can.
At the end of the day, 2024 may well be a year of Divergent Headlines.
SaaS and Cloud growth overall will remain strong. Shopify, Datadog, Crowdstrike, Google Cloud-Azure-AWS, Snowflake, etc. may well put up not just strong numbers, but even stronger than 2023. In fact, Gartner predicts enterprise software spend will cross $1 Trillion Dollars (!) for the first time in 2024!
Ok times are tough for many out there
But not Crowdstrike:
– Almost $3B in ARR
– Growing 37% (!)
– 26% Free Cash Flow
– 125% NRR
– $48B Market Cap — Up 94.58% this year (!)#nottooshabbby pic.twitter.com/VOlpHaWcVd— Jason ✨Be Kind✨ Lemkin 🇮🇱 (@jasonlk) November 13, 2023
But with so, so many startups funded in 2021 … we likely will also see a record number shut down in 2024. :(. That’s what this Pilot data also reflects.
So let’s be empathetic to those that wind down in 2024. But also focus on the prize at the same time — record Cloud spend. Carpe Diem.
