The biggest story in venture-backed startups is headcount.
More specifically, the lack of headcount growth across the whole sector for 20 months.
𝗚𝗿𝗼𝘄𝘁𝗵 𝗶𝗻 𝗻𝗲𝘁 𝗵𝗲𝗮𝗱𝗰𝗼𝘂𝗻𝘁 𝗼𝘃𝗲𝗿 𝘁𝗶𝗺𝗲
2019-2020 (24 months): up 284,000
2021-2022 (24 months): up 582,000
2023-2024 (20 months): up 11,000
Let's break down the chart below. This looks at 3.4 million job changes by employees at US startups who use Carta.
Green bars = total new hires across Carta companies by month
Orange bars = total employees who left their companies by choice
Red bars = total laid off employees
Black area = net change between hires and departures
𝗪𝗵𝗮𝘁 𝗶𝘀 𝗵𝗮𝗽𝗽𝗲𝗻𝗶𝗻𝗴?
Obviously hiring came way down as interest rates rose and capital efficiency came back into vogue across startups.
Layoffs also impacted the industry heavily in late 2022 and across 2023 (although they have subsided somewhat in 2024).
Lack of backfills is playing a role (when an employee leaves a startup, they are often not replaced these days). Why? Could be standard efficiency gains, could be AI, could be lots of things.
Some of the fastest-growing companies are still quite young and have yet to scale to the size of prior champions. Open question is will they ever be as big as older startups at the same funding stage?
This supply/demand change is happening in different ways across functions. AI/ML engineers, for instance, are seeing a positive wave of hiring.
Startup employee compensation is intimately tied to hiring forecasts (which explains why equity comp has fallen so much in the past 20 months).
Scale between stages is non-linear. It takes a LOT of seed-stage or Series A startups to match the headcount of a single Series E company. So startups as a whole can be healthy at the early stages and yet the total startup employees writ large can still fall.
Working at a startup rocks and I hope more people get the chance to do so next year.
𝗧𝗵𝗲 𝗕𝗶𝗴 𝗤𝘂𝗲𝘀𝘁𝗶𝗼𝗻
Is this a passing fad that will fade just as soon as the fundraising taps turn back on?
Or is this the real new normal for startups?
#startups #founders #startuphiring #startupemployees #venturecapital
Data from Carta out every Thursday - subscribe at the link in graphic so you don't miss a chart!
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