Are Companies Successfully Growing Revenues Before Raising Again Online?

Revenue growth chart by quartile range for post-revenue, repeat issuers since 2021. The bottom edge of the black bar represents the first quartile (25th percentile), while the striped purple bar represents the second quartile (25th-50th percentile). The solid purple bar marks the third quartile (50th-75th percentile), and the remaining top black bar is the top quartile (excluding outliers).

With Halloween right around the corner, a term you might hear in the startup investing world is “zombie companies.” Zombies are companies that, while they haven’t failed outright or shut down, continue to limp along—locking up investor capital without providing opportunities for gains or write-offs.

We decided to analyze post-revenue companies that previously raised capital online through equity, SAFEs, or Convertible Notes to examine whether their revenues are growing year over year as a potential indication of whether they are in fact finding success, or if they have “zombie” potential. This chart of the week focuses on companies that previously raised at least one round of Reg CF or Reg A+ capital and shows how their annual revenue growth rate has progressed in subsequent offerings.

• From the chart, we observe that the median revenue growth for these repeat issuers increased from 24% in 2021 to 56% in 2022, followed by a decline to 46% in 2023 and further down to 12% in 2024.
  • It’s important to note that financials tied to a new raise generally represent the previous fiscal year. For instance, companies launching after April 2022 likely submitted FY2021 financials. That partially explains why revenues in the “2022” start year of the chart increased from 2021, despite 2021 being the true local peak in the financial markets.
• The consistent decline in median revenue growth, coupled with the increased number of companies experiencing negative revenue growth, suggests that companies are now shifting away from a “growth at all costs” mindset. This could be attributed to rising interest rates, investor demand for profitability, or reduced access to cheap capital.
  • However, the data (see chart below) indicate that there aren’t yet more profitable companies launching in 2023-2024 compared to 2021-2022.
• The wide variance between the top and bottom quartiles in the early years (2021 and 2022) suggests that companies were experiencing more volatile revenue growth. The combination of a booming market and low interest rates likely benefited some companies immensely while leaving others struggling.
• The fact that mean revenue growth is declining along with the median suggests that there are fewer companies with massive revenue growth driving the overall numbers. Earlier years show more outliers skewing the average upwards. This could imply that the market for repeat issuers is maturing, and investors should expect more tempered growth moving forward.
• We also notice that nearly every year, the bottom quartile (bottom 25% of issuers) experienced negative revenue growth. The bottom quartile even saw revenue growth as low as -97% from 2022 to 2024, suggesting that many companies experienced almost a complete revenue loss compared to prior years.

“Zombie” Risk Growing

The increasing number of companies in the bottom quartile experiencing negative or flat revenue growth over time could signal that more startups are becoming “zombie” companies. This trend implies that a growing percentage of repeat issuers are stagnating or declining in performance despite raising additional capital.

Investors might see this as a warning to scrutinize future rounds carefully. Repeat issuers does not necessarily equate to better performance, and raising more capital could be masking underlying business problems without accompanied performance.

If annual revenue growth was declining because more companies were becoming profitable, that may tell an interesting story for investors. However, the data show that of all the post-revenue deals launched in each year, the percentage of profitable companies has actually stayed pretty even, perhaps even slightly declining in 2023-2024. This means that while companies are anecdotally striving more for profitability, they are so far (as of FY2023 financials) not making much progress in that respect.

Key Takeaways for Investors

• 2024-2025 deals will likely have lower revenue growth compared to 2021-2022; fewer companies are hitting 100%+ revenue growth.
• Top quartile growth has significantly decreased—from 439% in 2022 to 174% in 2024—suggesting fewer high-flying outliers.
• More companies are seeing negative revenue growth, especially in the bottom quartile, indicating rising “zombie” risk.
• The market has shifted focus from aggressive growth to profitability, likely due to rising interest rates and tougher funding environments.
• Average revenue growth is also declining, showing fewer extreme growth cases, signaling a more realistic investment climate.
• Investors need to scrutinize repeat issuers carefully, as raising more capital doesn’t guarantee strong revenue performance.

Revenue Growth of Startups Raising New Rounds Online