How Should You Staff Your Startup in 2023
Tomasz TunguzVenture Capitalist If you were forwarded this newsletter, and you'd like to receive it in the future, subscribe here. How Should You Staff Your Startup in 2023
Yesterday, the Enterprise Tech 30 List was revealed. Congratulations to all the winners (especially MotherDuck, Hex, & Omni)! I analyzed the headcount patterns within these companies to shed light on three questions :
The typical company grew headcount by 57%. The mid-stage businesses grew fastest at 88%, next early companies at 62%, & the later companies by 43%. The Giga companies held headcount flat over the past year. As companies employ thousands, we should expect growth rates to asymptote. It’s surprising to see the Giga companies flat - another indication of uncertain market times ahead. Looking at the data in more granular detail, most companies have grown headcount at similar rates, with a few outliers doubling or more & some shrinking headcount. The larger the business, the lower the growth rate, but the correlation is weak at -0.27. R&D, which includes engineering, IT, & product management, dominates early companies’ headcount as they build product. Once companies grow to about 50-100 employees, other teams blossom to support & market the product. From that point forward, these businesses typically operate with 30% headcount in R&D. Sales & Marketing are a different story. Startups operate with a broader variance with commercial teams : Canva & Databricks should paint the ends of the spectrum. On average, 20% of headcount is sales & marketing. The correlation with scale is effectively zero, meaning that ratio holds throughout the life of a business, barring the pre-commercialization epoch in a startup’s lifespan. These startups, held in high regard by venture capitalists, should provide some insight for startups as they navigate the macroeconomic environment. |
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