Cash Balance Data From 800+ Startups Indicate Founders Have Become Capital Efficient
Kruze Consulting, the startup accounting and CFO consulting firm servicing more than 800 venture funded startup clients, has analyzed the last 3 years of startups’ operating expense data. The data indicates that startups have reduced their operating expenses significantly, preserving an average runway of 22 months. Median runways remain strong, higher at the end of 2023 vs the beginning and surpassing 2019-2021 levels. Cash balances average $5M, down from the 2022 highs but above pre-bubble averages.
“We’re seeing startups turning a corner on capital efficiency. Based on the data, I expect one more wave of startup failures over the next six months,” said Healy Jones, Vice President at Kruze Consulting. “The remaining startups show healthy cash balances, lean operating expenses and enough runway to weather a continued venture winter. If we see a turnaround over the next 12 months, many startups will be well positioned to take advantage of growth opportunities.”
There was a mass culling of startups at the end of Q4 2023, Kruze’s data also shows. Currently, 33% of startups have only 6 or less months of runway, so another wave of startups shuttering over the next several months is expected. However, in 2019 nearly 50% of startups had 6 or less months of runway so the data suggests the health of the startup ecosystem has actually improved since then as founders have gotten better at managing burn.
Overall, founders are focused on efficiently driving revenue while keeping operating expenditures and burn reasonable. They’ve positioned themselves to make it through the current market conditions and, in the event of a turnaround, are poised for accelerated growth. Founders have learned to do more with less and are currently operating capital efficient businesses that continue to grow.
