April 13, 2022
Adam Hoeksema
When we help our clients create financial projections for their tech startups we are often asked what types of growth rates and revenue projections we would recommend. We wanted to be able to answer this question backed up with real data, so we worked with StarterStory to analyze 234 tech companies and released our full report here - Startup Revenue Stats: A Study of 234 Tech Startups [2022].
What we found was incredibly interesting!
But before we dig into the results, just a bit about the study itself.
Tech Startup Growth Rate Study
We analyzed revenue and employee data from tech startups in the following categories:
- Business to Business - B2B Software
- Business to Consumer - B2C Software
- Direct to Consumer - D2C Products
- Marketplace Businesses
The startups were split into 3 distinct stages of business:
- Less than 2 years old
- 2 Years to 4 years old
- Greater than 4 years old
Finally, we were able to estimate whether a company was bootstrapped or raised investment as well.
How Fast do Startups Grow?
So let’s get to it. We found the following data:
Average Revenue by Business Type by Stage of Business
Tech startups that were less than 2 years in business had annual revenue between $66,000 per year for B2C Software startups up to $934,000 in annual revenue for D2C Product startups.
We were then able to calculate the average % growth rate in annual revenue between the stages.
What we found is that D2C Product startups grow revenue much faster in the early years and then growth slows down; whereas, the software based startups like B2B Software and Marketplace businesses actually saw their growth rates accelerate in the later stages of business.
Revenue growth from the less than 2 years old to the 2-4 year old stage was as follows:
B2B Software Revenue Growth Rate - 82%
Marketplace Revenue Growth Rate - 110%
Direct to Consumer Product Revenue Growth Rate - 243%
We then found that the growth rates reversed in the later stages.
Revenue growth from the 2-4 year old stage to the over 4 years old was as follows:
B2B Software Revenue Growth Rate - 681%
Marketplace Revenue Growth Rate - 451%
Direct to Consumer Product Revenue Growth Rate - 99%
Employee Growth Rates at Tech Startups
Next we analyzed the number of employees that the various types of tech startups had at each stage of business. We also showed the differences between those companies that bootstrapped vs. those that raised investment.
We found the following:
You will see that companies that raised investment had a much higher number of employees at most stages of business. The investment that was raised typically allows a company to hire faster and run the company at a loss for a longer period of time.
We also looked at the typical revenue per employee in great detail in a recent blog post - How much Revenue per Employee is Typical for a Startup?
We hope this revenue and employee growth data will be helpful as you work on projections for your own startup. The goal is to help you determine whether your projections are reasonable with what other real startups have experienced.
If you have any questions, drop us a note at support@projectionhub.com and we would love to help!
