The startup world thrives on innovation and disruption. However, the recent slowdown in venture capital funding has sent shockwaves through the industry, impacting everything from funding rounds to company growth trajectories. This directly affects a crucial aspect of attracting and retaining top talent: compensation.
In this context, Carta, a leading provider of equity management solutions for startups, recently published its annual State of Startup Compensation Report. This comprehensive analysis leverages data from Carta Total Compensation, a platform utilized by thousands of startups globally to manage their equity programs and track employee compensation trends.
The latest edition of the report, focusing on the 2023 market, paints a clear picture of a market reset in the startup landscape. As venture capitalists tighten their purse strings, many startups are re-evaluating their talent acquisition strategies and overall compensation packages.
Key Findings:
Hiring Slump: Compared to the previous two years, startup hiring witnessed a significant decline in 2023. The number of new hires dropped by a staggering 49%, marking the lowest point in five years.
Layoff Surge: Early 2023 saw a surge in layoffs, with January recording the highest number compared to recent years. While the frequency subsided throughout the year, it remained considerably higher than pre-2023 levels.
Stagnant Salaries: Salary benchmarks exhibited minimal movement throughout 2023. However, a closer look reveals a shift within the data. Salary increases became more uniform across various job functions, with fewer outliers experiencing substantial gains or losses.
Reduced Equity Grants: A significant decline was observed in equity packages offered to new hires. The average fully diluted percentage of a company's total equity granted to new employees dropped by 36.9% compared to November 2022.
This article delves deeper into the report's findings, analyzing the data and exploring the implications for the startup ecosystem. We will examine critical trends such as:
Headcount Decline: For the first time in recent history, VC-backed startups on Carta experienced a net decline in headcount, signifying a stark contrast to the consistent growth witnessed in 2021 and early 2022.
Employee Turnover: A concerning trend emerged as departures surpassed new hires in 2023. Layoffs constituted a significant portion (47%) of all departures throughout the year, highlighting the economic impact on the job market.
Shifting Hiring Priorities: Startups exhibited a preference for hiring in specific areas. Engineering roles witnessed a rise in new hires compared to the previous year. Sales and operations also saw an increase, suggesting a focus on core business functions.
Focus on Individual Contributors: Companies are increasingly prioritizing hiring individual contributors (ICs) over expanding their management teams. This trend is particularly evident among larger startups.
