March 18, 2025 – A comprehensive new report titled “State of Startup Compensation: H2 2024” posted on Carta‘s website, authored by Peter Walker, Hamza Shad, and Kevin Dowd, unveils significant shifts in the startup employment landscape. Published on March 17, 2025, the 17-minute read leverages data from over 800,000 salary and equity data points and 1.3 million employees across 53,000 startups using Carta’s cap table management platform. With more than 30 new charts, the analysis highlights how venture-backed startups are adapting to a leaner, efficiency-driven era, impacting hiring trends, compensation structures, and employee retention as of late 2024.
The startup ecosystem has undergone a notable transformation over the past three years, moving away from the aggressive “growth at all costs” mindset that dominated the early 2020s. Today, profitability and resource optimization are top priorities. This shift has reshaped hiring practices dramatically. Between January 2022 and January 2024, monthly new hires at Carta-tracked companies plummeted by over 50%, dropping from a peak of 73,048 in January 2022 to a significantly lower figure by December 2024—down 53% year-over-year and 85% from that high. The hire-to-departure ratio also tightened, falling from 1.75 new hires per departure in 2022 to just 1.06 in 2024, signaling a cooling job market.
Despite fewer hires, average salaries across most industries and job functions rose in 2024, bucking the trend of reduced headcount growth. Layoffs and voluntary departures also declined significantly, with December 2024 seeing 8,858 voluntary exits (down 31% from the prior year) and 5,764 involuntary departures (down 35%). “This means that fewer employees are choosing to leave their current companies to take new jobs. It also means fewer employees are being subjected to layoffs,” the report notes, marking the lowest combined turnover since May 2021. However, involuntary departures remain elevated compared to pre-2020 levels, with Q4 2024 figures more than double those of Q4 2019-2021, reflecting persistent layoffs in the startup sector.
Equity compensation, a hallmark of startup allure, has shrunk considerably. The median equity package for new hires dropped 45% from November 2022 to September 2023 and remained 40.8% smaller by December 2024 compared to two years prior. Employees are also less inclined to exercise vested options, with only 32.2% of in-the-money options exercised in Q4 2024, down from 54.2% three years ago. This hesitancy aligns with a broader market reset since 2022, where falling valuations have diminished equity’s appeal.
Key Trends Driving the Startup Workforce
The report identifies several standout trends for H2 2024:
- Sales Hiring Surge: Sales roles accounted for 19.9% of new hires in 2024, up from 14.8% in 2020, making it the second most common job function behind engineering. This reflects a strategic pivot toward revenue generation amid tighter budgets.
- In-State Hiring Rebounds: After a pandemic-driven remote hiring boom, in-state hiring is climbing again. For startups valued $25 million to $50 million, the in-state hire rate rose from 37% in 2022 to 49% in 2024, suggesting a return to localized talent pools.
- AI’s Influence: The rise of artificial intelligence (AI) is enabling startups—especially in software-heavy sectors like SaaS—to operate with smaller teams. SaaS startups saw average headcounts drop by 13% at seed stage, 18% at Series A, and 10% at Series B compared to 2022, a testament to automation’s labor-saving impact.
Headcount growth was positive overall in 2024, with a net increase of 24,450 employees in the first nine months across Carta companies. However, Q4 saw a reversal, with a net loss of 10,397, erasing gains back to May 2024 levels. Physical industries like energy and hardware outperformed digital sectors like gaming and education in hire-to-departure ratios, possibly due to AI’s heavier disruption in software-focused fields.
Broader Economic Context
The U.S. job market provided a contrasting backdrop, adding 256,000 jobs in December 2024—the highest since March—while the unemployment rate dipped from 4.2% to 4.1%, according to the Bureau of Labor Statistics. Startups, however, lagged behind this national uptick, underscoring their unique challenges in a post-boom environment.
Geographically, compensation adjustments remain widespread, with 91% of startups valued $10 million to $25 million tailoring pay to cost-of-living differences, compared to 75% of $1 billion-plus firms. San Francisco and New York City tied for the highest average startup salaries in 2024, with Seattle close behind at 97% of Bay Area levels, per Carta’s data.
xAI’s Inferences and Considerations
The report doesn’t explicitly explore AI’s long-term implications, but its role in reducing headcounts—particularly in SaaS and digital sectors—suggests a structural shift. AI tools like large language models (LLMs) are likely accelerating product development with fewer staff, a trend that could deepen as adoption grows. This might explain why seed-stage startups are raising funds with smaller teams, a phenomenon not seen as starkly in hardware, where physical production limits automation’s reach. Additionally, the reluctance to exercise stock options could signal broader uncertainty about startup valuations, potentially tied to Federal Reserve rate hikes cooling venture capital flows since 2022, though the report doesn’t delve into macroeconomic drivers. The uptick in in-state hiring might also reflect a post-remote-work recalibration, possibly driven by tax incentives or regional talent hubs, an angle worth further study.
Looking Ahead
As startups navigate 2025, the focus on efficiency over expansion seems entrenched. Salaries may continue to edge up as competition for talent persists, but equity’s diminished role could alter how startups attract top performers. With sales hiring on the rise and AI reshaping workflows, the startup job market is settling into a new equilibrium—one that prioritizes stability over the frenetic growth of years past.
Keywords: startup compensation trends, H2 2024 job market, venture-backed startups, salary increases 2024, equity compensation decline, startup hiring statistics, AI impact on startups, in-state hiring rise, sales job growth, employee retention rates
