This week I received an email from Carta, the equity management platform, about a report called State of Startup Compensation, H1 2023. It’s a great report with lots of data on start-up compensation and hiring trends. As expected, the pace of hiring in the first half of 2023 was significantly below the first half of 2022. Anyone who’s interested in the report can find it here.
What I found more interesting was information Carta shared in the email, with charts, about start-up shutdowns. (I’m assuming a report on this is in the works.) I’ll summarize my big takeaway.
Through the first nine months of 2023, 543 companies using Carta for cap table management shut down. For context, Carta recorded 467 companies shuttering during the entire year of 2022. For the first nine months of 2022, 342 companies shut down, according to Carta.
That means that Carta is seeing a nearly 60% increase in shutdowns in the first nine months of 2023 as compared to the same period in 2022. And in 2023 Carta has recorded more shutdowns in nine months than it recorded for the entire calendar year of 2022.
In light of this shutdown data, many of the downward trends in the compensation report make more sense.
While all this data paints a somewhat gloomy picture, I’m a bit more optimistic. I think these trends will decrease the number of alternatives for aspiring entrepreneurs and spur the passionate ones in this group to bet on themselves. Said differently, these trends could lead to more people starting companies. It’s counterintuitive, but I think there’s a decent probability of that happening.