Compensation report: The state of startup compensation, H1 2022

The state of startup compensation, H1 2022

Author: Peter Walker
Read time: 9 minutes
Published date: June 27, 2022

Carta’s first startup compensation report looks at headcount, payroll, and equity benchmarks—plus trends in remote hiring, and salary across the U.S.

For most startups, payroll is the primary driver of cash burn. As inflation and economic unease rise, knowing trends in compensation becomes critical. This report is based on data from over 127,000 employee records across startups that use Carta Total Comp.

Key trends:

Remote hiring soars: In 2019, about 35% of new hires were based in a different state than the primary headquarters. That number has jumped to 62% this year.
Geo-adjusting is the norm: The majority of companies (84%) take employee location into account for compensation packages.
Engineering is a key hire: Engineering accounts for nearly half of payroll spend in companies valued between $1 and 10 million.
Terminations rise: Involuntary terminations made up 29% of departures in May 2022, nearly double the 15% recorded in August 2021.

Startup headcount

Headcount growth by valuation

Headcount expands as a company’s valuation increases. The median company valued at $50 to 100 million employs 52 people beyond the founders. Startups hitting the $1 billion mark typically have over 700 employees.

Headcount by job function

The largest job function at most tech startups is engineering, comprising over a quarter of the workforce. Sales, operations, and customer success also contribute significantly.

Workforce by level

Junior employees make up the majority of the startup workforce. As companies grow, the structure becomes more complex, with senior roles becoming a smaller percentage of the total workforce.

Headcount adjustments in 2022

Involuntary terminations accounted for 29% of departures in May 2022, showing a significant increase in layoffs.

Payroll and employee stock option pools

Payroll by valuation

Startups spend heavily on payroll early on, with a $10 million median payroll for companies valued at $50–100 million.

Payroll by job function

Engineering consistently accounts for at least 30% of payroll spend, regardless of company size.

Equity ownership

Employees receive a larger percentage of equity as their company grows. Median shares for employees in a company worth $25 million is around 14%, while unicorns offer around 20%.

Salary trends

Median individual salaries

Legal roles top the charts with the highest median salaries, followed by strategy, product, and engineering roles.

Growth trends

Between late 2021 and Q2 2022, five job functions saw more than 4.5% growth in average salaries.

Employee salary growth

Salaries typically jump by about 15% per level as employees advance.

Median salary by valuation

Smaller companies tend to have lower median salaries, but this gap narrows significantly as companies grow.

Remote work and compensation by geography

In 2019, about 35% of new hires were remote. That number rose to 62% in 2022.

Hiring by company valuation

Remote work trends extend across company valuations, but early-stage startups may still prioritize co-location for culture-building.

Geo-adjustment by valuation

Most companies (84%) do consider location for compensation, particularly at lower valuations.

Compensation by metro area

Top metro areas like San Francisco and New York offer the highest pay packages, while others are tiered based on compensation scores.

Regional trends

The West is still the favorite region for tech talent, while compensation growth lags in the Midwest.

Differences in regional compensation for tech workers

Regional pay can differ significantly for tech workers compared to other industries.

Year-over-year changes in regional comp

Salaries are adjusting towards those in higher-tier metros due to increased remote work.

This trend could have significant impacts for tech workers and companies recruiting talent in diverse locations.

Methodology

This report examines compensation trends across venture-backed companies to provide useful benchmarks to company leaders. Carta helps over 2,000 venture-backed companies compensate their employees through Carta Total Comp. The data presented above is an aggregated, anonymized view into the pay strategies of these startups.