State of startup compensation, H2 2022

Author: Peter Walker
Read time: 8 minutes
Published date: 27 February 2023

Startups in 2023 are facing compensation markets unlike any in recent memory. In this report, we’ll cover the most significant changes to the compensation market since publishing our debut State of Compensation report  and attempt to shed light on a few key questions:

• How have these protracted layoffs affected tech compensation?
• How have startups adjusted hiring plans to fit the new normal?
• And how can founders inclined to hire international talent ensure they’re paying competitively?

At Carta, we see it as 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 216,000 employee records from startups that use Carta Total Comp. We also layer in metrics on employee movement from the aggregate pool of more than 1 million employees currently working for the 33,000 startups that use Carta to manage their cap tables.

H2 2022 highlights

• Salaries have stopped rising: The average salary band in Carta Total Comp rose 2.1% from April to August last year. From August to November, the average fell 0.4%
• Layoffs are impacting all sectors: Laid off employees accounted for 52% of all employee departures in December 2022 after representing just 13% of departures in July 2021.
• Hiring is not keeping pace with departures: Net headcount growth across Carta cap table companies turned negative in September 2022 and has yet to rebound.

Employee movement

Carta data on employee movement—who leaves their company, who joins another, and whether those departures were voluntary or involuntary—is drawn from across our more than 33,000 startups on platform. This provides Carta nearly unmatched visibility into hiring trends across the private markets.

The headlines have it right: Startup employees are getting laid off at higher rates than at any point since 2020. Economic uncertainties provoked by the global pandemic sparked a sharp layoff spike that quickly subsided. The current mix of difficult fundraising and declining startup valuations has caused a prolonged layoff season.

Headcount & payroll

So where do layoffs and slowed hiring leave startup headcounts today? Many companies are making do with less. Payroll is still the primary driver of cash burn for most companies, causing many to rethink their headcount projections in light of new fundraising dynamics.

Company payroll typically crosses the $1 million threshold around the time the company reaches a $10 million valuation. A company typically breaks through the $10 million payroll threshold when it has 60-80 employees.

Salary changes over time

Are tech layoffs the harbinger of decreasing employee compensation? It depends greatly on the role in question. Carta Total Comp tracks hundreds of salary bands. A salary band is defined as the combination of a job function, role, and valuation.

When we examine the data by job function instead of seniority, the results are more equal. Every function saw average salary plateau or dip slightly between August and November.

Remote work

The narrative that companies would soon be compensating all employees equally, regardless of where that employee resided, has proven false. The vast majority of startups on Carta Total Comp use some form of geo-adjustment in their compensation strategies.

Geographic compensation

Four metro areas in the U.S. pay the highest rates for tech talent: San Francisco, New York, San Jose, and Seattle are all nearly identical in terms of base salary for tech workers.