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Workforce growth slows as startups prepare for worst-case scenario australiabusinessblog.com

The recent headlines have was dominated by announcements of major workforce cuts in the tech industry and especially at giants like Meta, Amazon and Twitter. But it’s not just the big names that are pulling back their workforce – private SaaS companies have been implementing staff freezes and cuts for nearly half a year now.

This is not surprising given that earlier this summer VCs began pushing for more focus on capital efficiency and the “Rule of 40” when it became clear that the “growth at all costs” mentality was falling out of favor and the goal was to runway to weather the storm.

To better understand workforce fluctuations within the private market, we programmatically tracked the workforce of 150 private Series A to Series C B2B Enterprise SaaS startups across industries over 24 months.

Here are the highlights of our research:

Companies are cutting back on workforce growth to lengthen the runway

The workforce has increased every month for the past four months at a median rate of about 2% compared to the 10% we previously saw. In addition, the 25th percentile of startups showed a reduction in headcount, indicating that many companies are taking drastic measures to extend their runways.

For companies with strong balance sheets, strong lenders and low burn/product-market fit, now is the best time to hire key employees.

This is a dismal indicator as startups brace for additional macro headwinds and repricing events.

Another round of cuts is likely early next year

If the macroeconomic environment does not improve, we should expect another wave of job losses after corporate board meetings in the fourth quarter (usually in January or February).

Many companies will discuss their CY ’23 projections, and headcount is always a lever to extend the runway as it can account for up to 80% of a startup’s cost. As many companies have kept their workforce, we can see them having to lay off people to reduce burns.

Stricter recruitments started as early as May 2022

Private companies started to hit the brakes around May 2022 and more companies started acting in unison, as can be seen in the tightening interquartile range of the workforce, which was heavily compressed but has now stabilized.

Companies serving HR and procurement saw the sharpest decline

As these services have shrunk across the industry, companies that provide technology for HR and procurement professionals saw the sharpest drop in headcount growth. However, all tracked customer profiles tend to reduce recruitment efforts.

There is a lot of available talent

On the positive side, this is an excellent time for companies with a good product market fit (and supporting investors) to hire the right talent, as big tech reduces headcount and the market is flooded with exceptional talent.

From aggressive workforce growth to keeping it flat

Until April, most companies were aggressively hiring, with headcount growing more than 10% monthly and the 75th percentile nearly 20%.

In contrast, the current median is +1% and the 75th percentile is +4%.

This downward trend started in May and continues today. The interquartile range continues to narrow, with the median eventually heading for a flat workforce (i.e., replacing natural turnover, but not hiring anymore). The 25th percentile fell into layoff territory around August, but both the 10th and 25th percentiles have since retreated.

Image Credits: Eddie Ackerman

Now that we’ve set the stage:


Shreya has been with australiabusinessblog.com for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider australiabusinessblog.com, Shreya seeks to understand an audience before creating memorable, persuasive copy.

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