State of Startup Compensation H2 2025

It’s now clear that AI is not solely a sector. It is an overlay on every sector. In 2025, roughly 40% of every dollar invested in startups on the Carta platform went to an AI company. In early 2026, that figure jumped to 54%. And there’s little reason to think AI’s share of total venture investment will stop growing anytime soon.

The dominance of AI is reshaping how founders build and compensate their teams. Smaller teams are proliferating. Average headcount at Series D fell 29% from its 2023 peak to 131 employees in 2025. At Series B, the average dropped from 53 to 45 over the same period. At seed, the median team size is now just four employees.

As team sizes shrink, companies have fewer workers to pay. This means more available capital for those employees that remain. As a result, median compensation levels have begun to grow. Across all job functions, the median size of initial equity grants issued to individual contributors at companies on Carta is up nearly 11% over the past two years, while the median salary for ICs is up 6.4%.

Nobody has benefitted more from this uplift in compensation than the technical employees who are making it possible. Among AI/ML engineers, the median initial equity grant ballooned by 31% between January 2024 and February 2026, nearly tripling the rate of growth in grant size across the broader population of employees. Over that same span, the median salary for AI/ML engineers rose by 9.1%.

The market for startup hiring and compensation has shifted in plenty of other ways since the public launch of ChatGPT in November 2022. Overall hiring has slowed. Job departures have become less common. Net headcount growth has flattened.

Exactly what this new world of AI-fueled startups will look like as the technology continues to evolve is still to be determined. But one fact has already been established: The old rules for building a startup no longer apply.

Key highlights

• A new normal for headcount growth: Companies on Carta recorded net headcount growth of 5,652 employees during January 2026, in line with monthly figures seen over most of 2025. Following the rapid headcount growth of 2021 and 2022 and the headcount contraction that followed in 2023, the market seems to have settled into a new equilibrium.
  

• The physical economy is hiring: Most sectors saw more new hires than job departures over the course of 2025. But headcount growth was strongest in some areas of the physical economy, including hardware, where there were 1.7 new hires for every departure last year. Healthtech, SaaS, and medical devices were among the other sectors with the most growth. For some startups in these spaces, the transition from research into build mode is underway.
  

• Smaller startups are shelling out for AI talent: Compensation packages are growing for AI/ML engineers across companies of all types. But the biggest gains can be found at the smallest startups. At startups valued between $1 million and $10 million, the median size of initial equity grants issued to AI/ML engineers has increased by 64% over the past two years. At startups valued between $10 million and $25 million, initial grant size is up 52%.

Hiring & headcount

An ongoing recalibration in how startups build their teams continued throughout 2025 and into the early days of 2026. VC-backed companies on Carta made 26,030 new hires in January—typically the busiest month for startup hiring—which was the slowest January since 2018. Hiring has now declined in four straight Januaries, marking an overall 65% decline from the recent peak in January 2022.

The number of total departures from VC-backed companies on Carta has also been declining gradually for the past several years. Layoffs have consistently been less common than employees leaving their roles by choice.

Hiring figures for recent months may still shift, as employee records are typically logged after board approval of share grants, but for now, the trend is clear: Across both hires and departures, there’s less movement among startup employees today than there used to be.

From 2019 through most of 2022, companies on Carta consistently combined to hire thousands more employees than they lost each month. At the apogee of this trend, in January 2022, net headcount grew by more than 55,000 workers in a single month.

Then, things changed—a shift that aligns neatly with the public launch of ChatGPT, reflecting the influence of AI on this market evolution. Since the start of 2023, monthly net headcount on Carta has hugged zero, even dipping into negative territory on several occasions. In 2025, however, monthly headcount growth began to rebound, reaching its highest levels since 2022. In January 2026, companies on Carta made 5,652 more new hires than they saw employee departures.

For most of 2021 and 2022, startups were engaged in a hiring spree. The industry was flush with cash from a record-breaking run of VC fundraising, and many companies opted to deploy that capital into their human resources, expanding their employee base at a rapid pace. In many instances, headcount was the strategy.

Today, that model has been inverted. Startups are building leaner by design. Smaller engineering teams are shipping more with AI. And this shift in strategy is reflected in the data on headcount. In January 2026, VC-backed companies on Carta made 26,030 new hires against 20,378 departures, with hires outstripping departures by a rate of 1.3x. Compare that to January 2022, when new hires were 3.8x more common than departures.

In January 2026, companies on Carta saw 12,161 employees leave their roles voluntarily, while 8,217 were laid off. Both figures will likely shift as additional employee movement is logged on the platform. The broader trend, though, is unmistakable: Job departures among startup employees have been growing less frequent for the past three years.

Compared to the recent peak in June 2022, voluntary departures are down 40%. Layoffs, meanwhile, are down 57% from a high point in January 2023. However, both of these figures are still well above the typical levels seen prior to 2021, when near-zero interest rates still proliferated. The new normal for job departures may be much lower than it was three years ago, but it’s also significantly elevated from the pre-COVID, pre-AI era.

In 2025, the hardware sector saw more headcount growth than any other common startup industry, with a hire-to-departure ratio of 1.7. Not far behind were medical devices, healthtech, and SaaS, each of which saw 1.4x more new hires than departures last year. There seems to be a clear link between these industries: The sectors adding the most headcount today are where startups are either building physical things or creating software that can help enable the physical economy.

Most sectors have seen an increase in the ratio of hires to departures over the past two years, reflecting a recovery from the rock-bottom hiring environment of 2023. There are a few notable exceptions, however: The energy, biotech, and gaming industries have all continued to see declining hire-to-departure ratios. In each of the past two years, the gaming industry has actually lost headcount.

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