# State of startup compensation, H1 2023 Author: Peter Walker Published date: 19 September 2023 The past year's decline in startup fundraising had major effects on startup employee compensation. The chill in [startup fundraising](https://fund-forecasting@carta.com/sg/en/learn/startups/fundraising/) is having major ripple effects on startup [employee compensation](https://fund-forecasting@carta.com/sg/en/learn/startups/compensation/). Startups on Carta collectively raised about $28 billion through the first half of 2023. That was less than half of the total funds raised in the last quarter of 2021. As their [spending capacity declines](https://fund-forecasting@carta.com/sg/en/data/longer-runways-2023/), startups have had to look for ways to lengthen their runways. Many have turned to headcount reductions: VC-backed startups have shed tens of thousands of workers this year. The renewed focus on cash efficiency has led to minimal salary growth, and equity packages have not expanded as many expected. At Carta, we believe it’s our responsibility to share the insights that come from an unmatched amount of data about the private market. This compensation report is drawn from more than 280,000 employee records from startups that use [Carta Total Compensation](https://fund-forecasting@carta.com/sg/en/equity-management/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 40,000 startups that use Carta to manage their [cap tables](https://fund-forecasting@carta.com/sg/en/learn/startups/equity-management/cap-table/). While the majority of the data presented below describes changes to base salaries, for the first time we’ve also charted changes to [equity compensation](https://fund-forecasting@carta.com/sg/en/learn/equity/compensation/) over time. ## H1 2023 key takeaways - **The pace of hiring has fallen sharply**: During the first half of 2022, startups on Carta collectively hired over 314,000 employees. That figure fell to 129,000 during the first half of 2023. - **Salaries flatlined to start the year:** Carta Total Compensation benchmarks for employee salaries fell 0.3% from November 2022 to May 2023. - **Equity packages saw substantial reductions:** Over the November 2022 to May 2023 timeframe, average equity grants benchmarks declined 26%. ## Labor market Carta data on employee movement—new hires, departures, and whether those departures were voluntary or involuntary—is drawn from across the more than 40,000 companies on our [cap table platform](https://fund-forecasting@carta.com/sg/en/equity-management/cap-table/). This provides Carta nearly unmatched visibility into hiring trends across the private market. Though headlines about startup layoffs seem to have subsided, tens of thousands of employees are still losing their jobs. Layoffs peaked in January of this year with 17,618 employees impacted in a single month. Voluntary employee departures have also declined from recent highs. Startup workers deciding to remain in their current positions for longer has likely reduced the need to backfill those roles, adding another drag to startup hiring in 2023. Net headcount across Carta companies has fallen for five straight months (and six of the last seven). The exception—January 2023—is likely due to a cyclical trend: January is usually the strongest month for new hires in any given year. This decline in hiring is driven primarily by later-stage startups. Funding has been most difficult to come by at the later stages, and valuations there have also seen the sharpest declines. No startup industry bucked the trend of reduced hiring, but energy-sector startups seem to have remained relatively more open to adding new talent. Total hiring in Q2 2023 for energy startups was down 33.6% compared with Q1 2022. ## Salary trends Startup layoffs and hiring reductions have begun affecting salaries. On average, our salary benchmarks rose 2.2% from April to August 2022. Since then, the average has either declined slightly or remained flat. Each dot in the chart above represents a [salary benchmark](https://fund-forecasting@carta.com/sg/en/learn/startups/compensation/benchmarking/) within Carta Total Comp. These are defined as the combination of a job function, role, and valuation—for example, an engineering manager at a company worth $50M-$100M. The data shows that bands have responded in varied ways to the economic pressures of the past nine months, but the overall trend is towards salary stagnation. ## Equity trends The real drama in startup compensation over the prior half year has taken place in [equity packages](https://fund-forecasting@carta.com/sg/en/learn/equity/compensation/). While salary benchmarks have remained essentially unchanged over this timeframe, the average equity benchmark has declined 26%. This analysis doesn’t refer to the nominal dollar value of the equity in question—that would be highly sensitive to the decline in startup valuations (and approximating early-stage startup equity value in dollars is a real challenge). Why have startups suddenly become much less generous in their equity offers? There are a few possible reasons. First and foremost: With the sudden influx of talented candidates on the market, negotiating power has shifted back to startups. There are now fewer offers at the upper end of the equity range. Second, companies will typically replenish their option pools when they raise a new round of financing. Funding rounds have grown scarcer, so companies have become more conservative with the remaining available option pool. Lastly, later-stage companies granting [RSUs](https://fund-forecasting@carta.com/sg/en/learn/equity/rsu/) may have reduced the size of employee grants because using prior equity benchmarks would result in too much dilution if the company has reduced the price-per-share used to determine grants. Many late-stage firms have seen the price per share of their equity fall considerably.