How long does it take tech startups to breakeven? A study of 107 tech startup projections.

June 6, 2022 by Adam Hoeksema

One of the most common questions we get from startups that work with us on developing financial projections is “when should we expect to breakeven?”  If you are pitching to investors, when do investors expect you to show a projected breakeven?   We wanted to try to answer this question based on data, so we partnered up with STORY Pitch Decks to analyze the financial projections of 107 of our clients to get a clear idea of what tech startups are projecting when it comes to reaching profitability.

Before we jump into the results of our findings in the 2022 Tech Startup Financial Projection Report, let’s take a look at when some of the world’s most successful tech companies reached a sustainable breakeven level.

When Did Large Tech Companies Breakeven?

The reality is that often the most successful startups take the longest to breakeven.  Why?  Because when you are growing fast, investors may continue to pour more funding into growth to allow you to delay breaking even in an effort to gain additional market share.  Some tech behemoths took a decade or more to reach a consistent breakeven.

Although there are many examples of successful startups that took over a decade to breakeven, that doesn’t mean that your pitch deck should show your plan to breakeven in year 18.

From my perspective, you want to be able to make a case to investors that you have the ability to breakeven if you need to. If you have the ability to operate profitably, then you have options:

  • You could try to raise additional capital to grow faster
  • You could slow growth and generate operating profits

So if the question is “when should we aim to breakeven and what should we share in our pitch deck?” Let’s look at what 107 other startups have projected.

Average Projected Breakeven for Tech Startups

We reviewed projections from 107 startups in the following categories:

  • B2B Software/Tech
  • B2C Software/Tech
  • D2C Products
  • Marketplaces

These 107 companies were all attempting to raise capital and fell into the following stages:

  • Pre-seed
  • Seed
  • Series A

We found that the average startup in the study projected breaking even in less than 2 years. Interestingly, we found that pre-seed startups projected breaking even the fastest, in just over 16 months, while seed and series A startups didn’t expect to breakeven for over 22 months post raise.

We speculated that pre-seed companies may be a bit too optimistic about the amount of time it will take to breakeven, while the Seed and Series A companies have been hit by the reality of operating the business and may realize the difficulty of reaching a sustainable breakeven.

If you are looking to project how long it will take for your startup to breakeven, take a look at our library of pro forma templates for 60+ different types of businesses, and then compare your projections to the data that we found in this study.  

Best of luck! 

Find a Template for your business here!

About the Author

Adam is the Co-founder of ProjectionHub which helps entrepreneurs create financial projections for potential investors, lenders and internal business planning. Since 2012, over 50,000 entrepreneurs from around the world have used ProjectionHub to help create financial projections.

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