Private SaaS Startups Drastically Slow Hiring to Extend Runway
A new study of 150 private B2B SaaS startups reveals that headcount growth drops to just 2% as companies brace for tough economic times. Another wave of layoffs is likely early next year if macroeconomic conditions do not improve.
Private B2B SaaS startups are significantly slowing their headcount growth as venture capitalists demand greater capital efficiency. A recent study tracking 150 Series A to Series C companies shows that median monthly headcount growth drops to around 2%, a sharp decline from the previous 10% rate. This shift reflects a broader industry move away from a "growth at all costs" mentality toward extending financial runways.
The data indicates that many startups are taking drastic measures to survive, with the 25th percentile of tracked companies actually reducing their overall headcounts. Companies providing technology for HR and procurement experience the steepest declines in hiring. This coordinated slowdown begins around May 2022, when the startup ecosystem collectively starts tapping the brakes on talent acquisition.
Experts anticipate another potential wave of job cuts early in the new year following fourth-quarter board meetings. Because employee compensation accounts for up to 80% of a startup's expenses, headcount remains the primary lever to reduce cash burn. However, the current slowdown releases a significant amount of talent into the market, creating an excellent hiring opportunity for well-capitalized companies that have already achieved product-market fit.