When will US startups start growing headcount again?
Data below from 40,000+ US startups on Carta paints a picture of an industry struggling with the headcount question.
Blue line is new hires per month. Magenta line is employees leaving their companies (whether through layoffs or by choice).
Way back in 2019, the blue line outpaced the magenta one by a solid amount. Startups on Carta that year grew net headcount by 155,335 employees.
Then things got kinda out of hand. The net headcount change for 2021 shot up to over 350,000 (with half a million new hires in a single year). That pace of hiring held in 2022, though departures also increased.
But since 2023 began, hiring and departures have effectively matched each other. In the 18 months between Jan 2023 and June 2024, net headcount grew by only 7,000 employees.
𝗘𝘅𝗽𝗹𝗮𝗻𝗮𝘁𝗶𝗼𝗻 𝟭 - 𝗜𝘁'𝘀 𝗔𝗹𝗹 𝗙𝘂𝗻𝗱𝗿𝗮𝗶𝘀𝗶𝗻𝗴
You could say that this slow down in headcount growth is merely a function of the general fundraising climate. As VC dollars became harder to raise, startups adjusted their payrolls. And if capital begins flowing more freely, there will be a corresponding growth in net headcount.
𝗘𝘅𝗽𝗹𝗮𝗻𝗮𝘁𝗶𝗼𝗻 𝟮 - 𝗜𝘁'𝘀 𝗮 𝗡𝗲𝘄 𝗪𝗼𝗿𝗹𝗱
Under this theory, the change in interest rates set off a new world in startups that may become permanent. Founders learned they could really do quite a lot more with the same or fewer employees. Outsourcing whole departments to other countries became more common. The advent of AI means productivity per worker will continue to dramatically increase, capping the number of ppl needed at each stage of development.
In many ways, Explanation 2 makes sense. It may be more healthy for the ecosystem as a whole. But I'm also saddened by the seeming lack of opportunities for great talent to join early startups. Will some of those folks instead found their own companies? Sure, but only a small fraction.
Either way, shout out to the people trying to land startup jobs right now. It's no easy feat 🙏
#startups #startupjobs #founders #fundraising #employment
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