For the past four years, January Ventures, a Boston-based venture capital (VC) firm, has conducted an annual survey of early-stage founders to gauge the temperature of the industry.
Well, the 2022 survey recently got released, and it holds a boatload of valuable information to inform prospective angel investors.
Where 2021 painted an understandably bullish picture of the investment landscape as early-stage startups gobbled up capital at inflated valuations, 2022, unsurprisingly, told a different story.
There’s an old saying about wishing you knew you were in the glory days while they were happening. That very well could apply to the difference between last year and this year.
However, despite the lean economic conditions, early-stage founders are not hitting the panic button.
In fact, there is information that suggests that these companies are beating to a far different drum than the world of Big Tech, which has seen widespread layoffs.
Before we get too far into that, though, let’s pull the scope back and examine the composition of the 450 early-stage founders surveyed…
- 61% are U.S.-based, 32% are based in Europe
- 48% raised pre-seed funding
- 32% raised seed funding
- 16% haven’t raised any capital
- 48% are women, 54% are minority founders
This represents a diverse sampling of founders from which to draw conclusions, and the information presented is certainly of interest.
Back to Big Tech…
In November 2022 – a 30-day span – 20,000 tech workers were laid off across some of the most recognizable names in the industry. It stands to reason that the startup landscape would follow this trend…
Not so fast. In contrast, just 4% of founders surveyed said they have reduced their headcount, and only 12% intend to pull back on their hiring plans.
While Big Tech (*cough* Elon Musk *cough*) has made a point to get employees back in office, 85% of the surveyed founders said their team remains fully or mostly remote.
Another interesting revelation highlighted that founders are treating this economic downturn differently than the one at the onset of the COVID pandemic. Where in 2020, 81% of founders said they were cutting costs, just 50% are taking that tact in 2022.
But perhaps the most informative takeaway of all had to do with one of the most relevant topics to angel investors of all: runway.
With 43% of surveyed founders indicating investors have slowed their pace, 81% of founders say they have 12 months or less of runway to operate.
This is the grim reality of operating a startup, as these companies don’t have the privilege of waiting out the macroeconomic conditions. This perhaps partially explains the reasoning behind half of those surveyed indicating no intention to cut costs.
There are plenty of conclusions to be drawn from this information, as it further underscores the make-or-break atmosphere of early-stage startups.
However, the lack of layoffs show that these companies are still putting the pedal to the floor in hopes of reaching their ultimate destination.
It’s always good to have a bird’s eye view of the angel investing landscape, so information like this goes a long way toward keeping us informed.
To read the rest of January Venture’s 2022 survey, click here.