Workforce growth slows as startups brace for worst-case scenarios • TechCrunch

Workforce growth slows as startups brace for worst-case scenarios • TechCrunch

Workforce growth slows as startups brace for worst-case scenarios • TechCrunch

Recent headlines have was dominated by announcements of deep cuts in the technology industry and in particular at giants like Meta, Amazon and Twitter. But it’s not just the big names that are downsizing — private SaaS companies have also been implementing hiring freezes and downsizing for nearly six months now.

Not surprisingly, venture capital firms began to focus more on capital efficiency and the “rule of 40” earlier this summer, as it became clear that the “growth at any price” was no longer in vogue and that the objective was to extend the runway to weather the storm.

To better understand headcount fluctuations within the private market, we programmatically tracked the headcount of 150 Series A to Series C SaaS B2B private startups across various industries over 24 months.

Here are the highlights of our study:

Companies cut headcount growth to expand runway

Headcount has grown each month for the past four months at a median rate of about 2% compared to the 10% previously observed. Additionally, the 25th percentile of startups showed headcount reductions, indicating that many companies are taking drastic measures to expand their footprint.

For companies with a strong balance sheet, strong backers, and weak consumption/product-market fit, now is the best time to make critical hires.

This is a grim indicator as startups prepare for additional macro headwinds and repricing events.

Another round of cuts likely early next year

If the macroeconomic environment does not improve, we expect another wave of job cuts after corporate board meetings in the fourth quarter (usually January or February).

Many companies will discuss their CY ’23 forecasts, and headcount is always a lever to expand the track since it can account for up to 80% of a startup’s spend. Since many companies have maintained their workforces, we may see them having to lay off staff to reduce the burn.

The tightening of hiring began as early as May 2022

Private companies began to apply the brakes around May 2022, and more companies began to act in unison, as shown by the narrower interquartile range of headcount velocity, which has been compressed sharply but is improving. is now stabilized.

Companies serving human resources and purchasing saw the largest decline

While these services have declined across the industry, companies providing technology for human resources and procurement professionals have seen the largest drop in workforce growth. However, all client profiles tracked tended to reduce hiring efforts.

There are many talents available

On a positive note, now is a great time for product-market-ready companies (and supportive investors) to hire the right talent, as big tech downsizes and the market is flooded with exceptional talent.

From Aggressive Membership Growth to Flattening

Through April, most companies were hiring aggressively, with headcount growing month-over-month by more than 10%, and the 75th percentile was close to around 20%.

In contrast, the current median is +1% and the 75th percentile is +4%.

This downward trend started in May and continues today. The interquartile range continues to compress, with the median finally heading towards stable headcount (i.e. replacing natural attrition but no hiring beyond that). The 25th percentile fell into layoff territory around August, but the 10th percentile and 25th percentile have since retreated.

Workforce growth slows as startups brace for worst-case scenarios • TechCrunch

Picture credits: Eddie Ackerman

Now that we’ve set the stage:


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