Startups hired far fewer employees last year compared to the number of workers they added in 2022. And many of those that did join aren't sticking around long.
That's according to Carta, a cap-table management platform that tracks employment statistics, venture funding and other data for more than 40,000 startups. Startups on Carta made just 267,818 new hires in 2023, which is about half of the 523,487 hires made in 2022. Startups added 525,827 new hires in 2021, Carta said.
That's perhaps not surprising, given how layoffs and shutdowns have permeated across the startup sector in 2023. But it shows even as the venture-capital-backed startup sector sees rapid growth from artificial-intelligence firms, that still wasn't enough to keep startups from experiencing a major drop in hiring last year.
In fact, last year was the first time in the past five years that headcount at VC-backed startups on Carta experienced a net decline, the report said. In 2021 and the beginning of 2022, net headcount across startups on Carta was "regularly increasing by tens of thousands of employees each month," Carta said. In 2021, net headcount increased by 346,222 workers. Last year, it fell by 18,377.
Layoffs and voluntary departures have led to significant employee turnover at startups. Almost one-third of employees who were hired in 2022 are no longer with their company, and 23% of new hires from 2023 have already moved on, the report said.
Carta, which tracks more than 1 million startup employees across its 43,000 companies, said 43% of employees have been at their current company for less than two years, and about 75% for less than three years. Only 8% of startup employees have been at their company for more than five years.
The hiring challenges and employment turnover come as startups navigate a post-Covid world with far less venture capital available. Startup funding last year dropped 30% from 2022 and 50% from 2021, even amid the funding frenzy for artificial-intelligence firms.
As hiring slows for startups broadly, the job market for engineers remains strong. The percentage of engineering hires ticked up last year, increasing from 23.8% of hires in 2021 to 27.1% last year.
"For many startups, particularly those in deep tech, engineering forms the base of the business’s hiring needs," the report said. "While those companies may cut back on hiring for other job functions, there’s always demand for engineers."
