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)

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