Startup growth in 2022

Public company earnings generally have been strong but show a declining growth rate. I suspect that a lot and likely most startups will not be in such a luxurious position. After a likely booming 2020 and 2021 of growth, I expect most startups to come back to earth and experience flat or even down revenue.

In the long run, this may be okay as COVID could have accelerated growth for most of these companies.

For example, imagine a company that grew from $10m in ARR at the end of 2019 to $50m at the end of 2021, but stayed flat at $50m at the end of 2022.

There’s multiple ways to look at the company.

The pessimistic view is that the company is flatlining. Their growth has plateaued and they need to make serious changes in order to continue growth.

A more optimistic way to look at it is that the company cleared it’s pipeline and just grew faster than normal in 2020 and 2021. They paid for their success in 2022 when the market and budgets dried up. Their product may be perfectly fine, but they may need time for the market to recover and GTM to build a pipeline.

Many companies would’ve been happy that if you told them at the end of 3 years, they would 5x their ARR.

Of course, all this is an insanely simplified view in a complicated time right now in startup land. There’s many more factors than looking at growth rates of companies. But it is one indicator and an interesting one that many will be focused on as numbers start to leak out about startup performance in this down market.