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03
Profitability & Efficiency
The current dilemma is to balance growth and profitability; cost efficiency focuses on 3 key levers
Growth
X
Profitability
The current dilemma is to balance both sides. If, before, was all about growth, the scenario has now changed and startups are under a lot of pressure to show a clear path to profitability much earlier on.
We identified 4 clusters of startups based on how they manage this balance
19% of startups report growing at a faster pace, while closely tracking their profitability aspirations
Strong growth includes startups with +50% average annual growth from 2020 to 2022 on revenue or client base
Strong profitability includes startups that have reached breakeven, have 6+ months of runway, and had no down round. And/or startups that monitor success through profitability related metrics
Source: McKinsey LatAm Startup Study (2023)
On average, a startup cycle from launch to monetization is less than a year ...
Source: McKinsey LatAm Startup Study (2023)
On average, a startup cycle from launch to monetization is less than a year ...
…but the journey to breakeven can take much longer
Startups that didn’t reach breakeven by startup age
% of respondents by range of startup’s age
Source: McKinsey LatAm Startup Study (2023)
Startups seeking cost efficiency focus on 3 key levers
52%
use CAC & sales expenses optimization
49%
implement IT costs efficiency levers (e.g., Cloud Usage, engineering productivity)
40%
made layoffs to reduce costs
Source: McKinsey LatAm Startup Study (2023)
LTV/CAC shrinks throughout startups journey to maturity, as customer acquisition becomes more difficult and growth investments increase
Source: McKinsey LatAm Startup Study (2023)
Companies with a high engineering productivity use 4 levers to increase efficiency
Architecture & platform
Processes & tools
Culture & talent
Metrics
Companies leading engineering productivity achieve
20-30%
increase in productivity
Up to 3x
reduction in time to market
20-30%
reduction in errors
Source: McKinsey Developer Velocity Survey
In terms of cloud efficiency, 73% of Rockstars report adopting usage monitoring to optimize cloud costs
Reported adoption of usage monitoring
% of respondents
Source: McKinsey LatAm Startup Study (2023)
Additionally, layoffs are impacting startups in LatAm
40%
of startups in LatAm had to lay off part of their workforce
~20-30%
was the average workforce affected
Source: McKinsey LatAm Startup Study (2023)
