4 min read
Remember the days of hyper-growth, seemingly endless funding rounds, and throwing fistfuls of equity at every talented recruit who walked through the door? Those days are on hold.
According to a recent report by Carta, a leading provider of equity management solutions for startups, the bear market has sent shockwaves through the industry, impacting everything from hiring sprees to compensation packages. As VC funding has dried up and the market braces for a potential recession, many of the free-wheeling practices of the past few years are giving way to a more cautious and strategic approach. This new reality is having a significant impact on how startups hire and compensate their teams.
In this blog post, we’ll dive into the findings of Carta’s recent report, which sheds light on the current state of startup compensation and hiring. We’ll explore how the bear market has forced companies to re-evaluate their workforce needs, leading to a hiring slowdown and a shift in priorities. We’ll also examine how compensation strategies are evolving, with a focus on both salaries and equity. By the end, you’ll be armed with valuable insights to help you navigate the current market and make strategic decisions about your own startup’s talent strategy.
Key Takeaways on Startup Compensation and Hiring
Hiring Freeze and Layoffs
For the first time in years, startups on Carta experienced a net decline in headcount in 2023. The report highlights a significant contraction in hiring, with layoffs surging in early 2023 (over 18,000 employees) and remaining high compared to recent years. Sectors reliant on software saw a bigger hiring hit than those in deep tech (engineering, research).
Employee Turnover
The report finds high employee turnover, with over one-third of 2023 hires already no longer with the company. Short-tenured employees were most impacted by layoffs, with a higher percentage of departing hires concentrated at the entry-level and mid-level roles.
Shifting Priorities
Startups are focusing on core functions to weather the bear market. The report reveals increased hiring in engineering, sales, and operations compared to customer success, support, and product. Additionally, companies are prioritizing individual contributors (ICs) over management bloat, with the percentage of IC hires increasing in recent years.
Startup Compensation Trends
Overall salary benchmarks remained flat in 2023, but with significant variations across roles. Entry-level and C-suite roles saw slight salary increases, while mid-level roles (managers, VPs) experienced declines. Customer success and marketing saw the biggest salary gains in recent months, while data jobs were the only ones with declining salaries.
Equity Shrinks
The average equity grant for new hires decreased by 36.9% compared to November 2022. While it stabilized recently, the overall pie is smaller. Equity decline impacted all job levels, with senior ICs and managers hit hardest. The VP level saw the smallest decline. The report also finds a significant drop in the exercise rate for vested stock options due to declining valuations, but it has begun to climb again in Q4 2023.
Remote Work
Most startups (84%) adjust compensation based on location, with smaller companies more likely to do this. The trend of remote work continues, with smaller companies leading the charge. Larger companies are hiring in-state at a higher rate than before. Interestingly, industries with higher in-state hiring rates (energy, hardware) also saw more hiring overall in 2023. Remote work isn’t a one-size-fits-all solution.
Future-Proofing Your Startup
The startup landscape has shifted from a growth-at-all-costs mentality to a more measured approach. Hiring is down, compensation is adjusting, and companies are focusing on core functions. Carta’s report provides valuable insights for founders navigating the current startup hiring bear market and startup compensation bear market. By understanding these trends, founders can adapt their strategies, attract and retain top talent, and position their startups for success in the new market reality.
To learn more about startup compensation and hiring, see if you qualify for membership to join Founders Network.
Looking for startup advice, connections, and insights?
Tap into a global network that enables you to answer questions, build relationships, and gain the perspective you need to move faster.
Peer mentorship with fellow tech founders
Pitch practice with Tier 1 VCs
Accelerator grade discounts
