Between massive IPO bumps, founders being picked off by big tech, and ever-increasing round sizes and valuations, today’s startup market is getting a little frothy. Still, we remain optimistic at where the ship is headed. Across the board, startups are continuing to accelerate from Q1, with ARR and GAAP revenue growth rates continuing near three-year highs. Startups have dialed in on how to forecast and execute in this AI era, with high plan attainment, (slightly) increased spending with an eye toward growth, and renewed optimism for continued growth throughout the rest of the year.
The top companies continue to outperform, with top-quartile growers meaningfully pulling away from the pack at over 3x the growth rate of the median company. This supports what we’ve seen in our GTM survey work, with AI companies selling their products almost 50% faster than other software vendors. While being an AI startup does not automatically mean wild success, those that manage to catch the wave are simply playing a different game.
What you need to know:
- Companies are continuing their acceleration: ARR and GAAP revenue growth rates continued near three-year highs.
- (Almost) everyone is operating on schedule: Median plan attainment ticked down slightly to 91%, as companies continue to dial in their plans.
- They’re keeping burn in check: Median burn multiple improved to 2.0x, significantly lower than most of the past three years, and near the peak efficiency we saw last year.
Growth continues near three-year highs
The tempered growth we saw in 2024 has given way to more definitive progress, with median GAAP revenue growth and ARR growth sustaining three-year highs. Encouragingly, these numbers are on pace with 2025 forecasts. The best companies are continuing to pull ahead, and the gap is widening. Double-clicking into the data, it seems this top-quartile performance is being driven by a handful of AI-native startups that are seeing gangbuster growth. As the AI tailwinds continue, hopefully we’ll see more companies get a lift with continued improvement to the median and top-quartile growth rates.
Startups are continuing to set right expectations for the market with solid execution
Companies are getting better at forecasting in the AI era, with the median company hitting 91% of their plan, and almost half of companies meeting or beating their plan. This isn’t exactly the blowout plan attainment we saw in public tech companies, but is good for early-stage startups in a market as volatile as AI. Execution remains strong, and companies are optimistic that growth will continue through the rest of 2025.
Burn multiple ticked down while growth rose, signaling a return on companies’ cautious reinvestment
Companies are continuing to invest efficiently, with median burn multiples at historic lows as companies continue to invest efficiently. As growth returns, operators may be more willing to reinvest in hiring, product, and go-to-market.
Top performers are expecting reacceleration to continue through the end of the year
It’s only been two quarters of reaccelerating growth, but looking at updated 2025 forecasts, companies believe they’ll continue that growth throughout the rest of the year. We’ll have to see how H2 plays out, but by the end of next quarter we should have a good sense of where the year will end, as well as an initial estimate of 2026’s whisper numbers.
