Instead of Asad’s clever writing, you’re stuck with me today. I’m Peter Walker, I run the Insights team at Carta, and we’re going on a tour of what the hell is happening in US startup world in 6 charts.
Why should you care what we have to say about venture-backed startups? Good question.
Carta is the leading cap table platform in the US today. We estimate ~50% (over 45,000) of US venture-backed startups use our software to issue equity to employees and investors. Our insights are drawn from the aggregated and anonymized data pools of those startups, from pre-seed to pre-IPO.
Chart 1:Overall Fundraising
Let’s get the negative headline out of the way. Fundraising across venture-backed startups is significantly down from the halcyon days of 2021.
But you can easily make the argument that the aberration was the easy-money period of 2021 and early 2022 rather than the stricter environment of today. A potent mix of zero interest rates, a global pandemic pulling forward digital demand, and a dose of irrationality combined to create a storm of funding.
Chart 2: Effect on Founder Timelines
Less capital being deployed leads to longer gaps between funding rounds. Founders who may have expected to receive another slug of capital 24 months after their Series A, for instance, may have had to make that cash last 30 months (or even longer).
Some startups have responded by becoming profitable businesses (although that’s no easy task for most tiny venture portfolio companies). Some have taken in bridge rounds at a high rate of dilution. And some have had to swallow tougher medicine.
Chart 3: Down Rounds Abound
A historic share of startups have had to take down rounds in the past 24 months, lowering the valuations of their companies. This can be a challenging moment for any founder—explanations are demanded by investors, employees, friends and family.
So what have founders done to adapt their businesses to this new climate?
Chart 4: Hiring Halts
US startups on Carta hired 72,000+ people in January 2022 but only 27,677 in January 2024.
A spat of layoffs combined with the above hiring reticence means that more people actually left US startup jobs than joined them in recent months.
It's possible that these hiring trends will hold as a secular shift towards automation (see: AI) keeps total headcount low even when funding rebounds.
What does all this turmoil mean for the would-be startup joiner?
Chart 5: Employee Equity Eroding
Startups funding declines → more time between rounds → valuations decline → hiring falters → employee compensation takes a hit.
You can see the orange line reflecting a static environment for startup worker salaries (although in a period of high inflation, static isn’t so great).
But the real hit has come in startup equity packages. The average equity offer is now 36% lower than it was in November 2022. That’s literally 36% less shares, not simply a lower valuation on companies overall.
Well…that was a bummer note. Let’s not end there.
Bonus Chart 6: M&A Rising
In order for this whole lethargy in startups to get reversed, investors need to see some returns. Liquidity has been tough to come by but we are seeing M&A rebound in recent quarters.
Jamin had to adjust what is considered as “high growth” in the public markets, from >30% NTM growth to >27% NTM growth, because only one public tech company is projected to grow >30% after this quarter’s earnings. Tells us a bit about how hard it is to find growth in this market, so if you have some, celebrate it.
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