As we kick off the 2024 annual planning season, we’re sharing an early view of what we’re seeing in early-stage startups to give sense of what’s to come next year. We hope these “whisper numbers” can help you calibrate your 2024 plan and give you a relative sense of what direction startups are headed in next year (you can see the 2023 numbers here).
Before we go into the details, here’s the high-level summary:
- Median Growth is expected to rebound to 37%, up from 19% in 2023. Top-quartile and top-decile growth is also reaccelerating.
- Median Operating Income is estimated to improve to -36%, up from -73% in 2023.
- Median Burn Multiple is expected to jump to 0.9, from 2.9 in 2023, driven by both the growth and burn improvements we see above.
As we covered in our Q323 Flash Update, growth ticked up in Q3 for the first time in six quarters:
- Median ARR growth rate was 19%, making this the first quarter since Q122 that growth did not decline and 1% higher than Q223 growth of 18%
- Top-decile ARR growth rate was 113%, significantly higher than Q223 top-decile growth of 63%
- Churn ticked down to 14%, lower than Q223 annualized churn of 16%
We’ll hopefully see the slight reacceleration we saw in Q3 continue into 2024. Anecdotally, we’ve already started seeing some sharper reacceleration across our portfolio. As the worst of the slowdown seems to be behind us and churn starts improving, we expect companies to start cautiously reinvesting in growth.
Looking back: How accurate were last year’s whisper numbers?
Comparing the 2023 whisper numbers to actuals, we can see that the whisper numbers last year drastically missed the mark. Median growth was almost 40% lower than initially estimated as the macro slowdown that started in 2022 continued through 2023. Companies were clearly too optimistic in their original 2023 forecasts and were caught off guard by the continued buying slowdown and sharp increase in churn we saw earlier this year.
Looking forward: 2024 whisper numbers
As of right now, companies expect growth to rebound in 2024, although still stay below 2022 levels. Median ARR growth is expected to nearly double to 37%, compared to the 19% we saw in 2023, and growth is expected to reaccelerate for all quartiles. This is good news, although it’s clear we still have a ways to go before returning to pre-pandemic growth levels. Hopefully growth continues to reaccelerate throughout 2024 and we end next year close to pre-Covid growth, but with much higher efficiency than before.
2024: The Year of Efficient Growth
Where 2023 was the “year of efficiency,” 2024 is shaping up to be the “year of efficient growth,” with companies reaccelerating growth while building off a base of significantly improved operational efficiency. Companies are expecting to improve operating margins from -73% in 2023 to -36% in 2024, which is the highest level we’ve seen in recent history. Top-decile startups are even expecting to be profitable, which is nearly unheard of in venture-land. (You can read more on expected operational efficiency here.)
If the operational improvements we saw in 2023 continue as growth reaccelerates per companies’ early 2024 plans, then next year we’ll see startups achieve new levels of efficient growth. Looking at burn multiple, which measures the efficiency of turning one dollar of investment into one dollar of new ARR, the median tech startup is forecast to achieve a burn multiple of ~0.9 next year, which is significantly better than the ~1.6 historic average for early-stage startups. These potentially historic levels of efficiency could reignite investment into the most capital-efficient startups that have demonstrated the ability to turn dollars invested into new ARR effectively.