Where are the 2018 startups now?

Read time: 3 minutes.

Welcome to the 41st edition of The Growth Elements Newsletter. Every Monday, I write an essay on growth metrics & experiments and business case studies.

Today’s piece is for 5,100+ founders, operators, and leaders from businesses like Shopify, Google, Sage, Hubspot, Servcorp, Zoho, Apollo and more.

Happy Monday!

Where are the 2018 startups now?

A significant number have shut down, a few are ongoing, some have been acquired, and a tiny percentage have IPO'd.

► Carta’s visualisation chart by Peter Walker - it took 3,067 startups incorporated in 2018 and shows:

• 49% have shut down.

• 45% are still ongoing.

• 5% have been acquired.

• 0.2% have IPO'd.

► Carta’s chart shows a stark reality: 49% of startups shut down, highlighting the challenging market for new ventures.

► It will be interesting to see in the next 18 months what will happen to 45% of startups that are still ongoing.

► Why 18 months? This is because that's the startup's average runway timeframe after any investment round.

𝐒𝐭𝐚𝐫𝐭𝐮𝐩 𝐒𝐮𝐫𝐯𝐢𝐯𝐚𝐥 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐲

► Focusing on building a solid foundation is exceptionally crucial.

This includes:

[1] Solid customer acquisition strategy.

[2] Growth model that predicts CAC and tactics to alter to reduce the Payback period.

[3] Data looped product onboarding to enhance and maintain the high Activation rate.

[4] Feature enhancement and platform stickiness are needed to retain users, reduce churn, and achieve LTV between 5 and 10 times CAC.

𝐄𝐱𝐢𝐭 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐲 𝐕𝐨𝐢𝐜𝐞

► Acquisition insight reveals a startup's most likely exit path is through M&A rather than an IPO. Why? Because 5% is 250 times larger than 0.02%.

► And most startups prefer M&A over IPOs primarily due to accessibility and practicality.

► M&As are more common and often more straightforward for startups, providing a quicker and more certain exit strategy compared to the complex and time-consuming process of going public through an IPO.

► This suggests that focusing on planning for strategic fit in any potential acquirer's portfolio from an early stage could be beneficial.

This includes:

[1] 10-12% YoY net growth rate on ARR

[2] Solid AARRR Playbook.

[3] CDP Pipeline and 90 days recurring product roadmap

[4] SOPs across all departments.

[5] Engaged and Range teams.

[6] 6 months cash reserve and 6 months credit line working capital.

[7] Aim for a minimum of 10% EBITDA.

[8] Legal compliance and clean CAP table.

[9] 2 years projection and valuation model

That's it for today's article! I hope you found this essay insightful.

Wishing you a productive week ahead!

I always appreciate you reading.

Thanks,
Chintan Maisuria