Headcount contracted across the startup ecosystem as companies continue to adjust compensation strategies in response to economic headwinds.
As VC-backed startups continue to contend with bear-market headwinds, startup hiring and compensation have undergone a reset.
Last year marked a startup employment contraction: There were more total job departures from companies on Carta in 2023 than there were new hires, the first annual net contraction in at least five years. A wave of layoffs that peaked in January 2023 also contributed to the workforce contraction. That month, startups laid off more than 18,000 employees.
Startups were still hiring last year, but their priorities shifted. Employees in engineering, sales, and operations made up a larger portion of all new hires, while job functions in customer success, support, and product accounted for a smaller portion of new hires than they did in the past. Compensation strategies shifted, too: Newly hired entry-level workers and C-suite leaders both saw their average salary levels increase during 2023, while new managers and VPs saw their average salaries decline.
At Carta, we believe it’s our responsibility to share the insights that come from an unmatched amount of data about the private market. The data below comes from thousands of CTC customers with over 500,000 data points used by Carta Total Compensation. Other metrics in the report, such as those that describe employee movement, derive from the aggregate pool of more than 1 million employees currently working for the 43,000 startups that use Carta to manage their cap tables.
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For the first time in at least five years, headcount at VC-backed startups on Carta experienced a net decline. Back in 2021 and early 2022, net headcount across Carta was regularly increasing by tens of thousands of employees each month, peaking at more than 50,000 in January 2022. Across all 12 months of 2021, net headcount increased by 346,222 people.
In 2023, it declined by 18,377.
Layoffs and voluntary departures trended down in 2023
Layoffs grew much less frequent as 2023 progressed, with the monthly layoff count declining by 57% from January to December. Still, relative to the last few years, layoffs remain frequent: More workers were laid off in December 2023 than in any month from 2019 or 2021 (in 2020, Covid-related layoffs spiked in Q2).
Voluntary job departures also grew less frequent over the course of 2023. But the decline wasn’t as steep as it was for layoffs. From January to December, the number of voluntary job departures dipped by 24%.