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The startup conundrum
Startups have been struggling to attract new talent due to rising salaries and a stagnant economy—a perilous combination that is stifling their growth.
Data from tech company Carta shows that startups on their platform added just 27,677 hires in January 2024, a massive 29% drop from the previous year. This is also the fewest new hires in any January so far this decade.
Often seen as the green shoots of an economy, startups drive innovation, create jobs, and stimulate new markets. The occasional startup also becomes an economic giant, like Google, Facebook, Amazon, Netflix, and Microsoft. The difficulties in increasing their headcount is a deeply concerning trend that could lead to a major economic slowdown if not addressed immediately.
Equity packages
The Carta numbers show that salaries in almost every job function have increased over the past year. Startups, by nature, have limited capital, so they leverage other ways to boost their workforce.
These fledgling companies usually place equity packages on the table to attract top talent since they can only offer modest salaries compared to their bigger competitors. Those who accept these equity packages could earn lucrative sums when they sell their shares when the company conducts an initial public offering.
However, this method of luring new talent has waned. Tech companies’ valuations have declined in the past 18 months amid a volatile stock market and high interest rates. Employees no longer believe that trading a relatively low compensation for equity would yield wealth.
Reinventing recruitment models
The Carta data also show that only three sectors—energy, hardware, and medical devices—have shown net positive headcount this year. The SaaS and Fintech industries have been flat. Meanwhile, the net workforce of the Adtech, Biotech, Healthtech, Consumer, Education, and Gaming industries has shrunk considerably.
This is alarming data since there is a vast global talent pool offshore that’s ready to help these fumbling startups. Offshore professionals are available at a 70% discount, making it ideal for new firms, given the little capital they have.
Offshore staff aren’t just stepping stones. Given the benefits they bring, established companies have integrated outsourcing into their workforce models. Saving on salary costs is just a bonus. Offshore workers, who are getting better every day through upskilling and experience, are critical players in the business journey.
Offshore professionals can be part of the startup’s core team or its administrative operations. Either way, outsourced workers will empower them to focus on developing their novel ideas.
An economy’s survival depends on the performance of the current business crop and the progressive models and products of new entrants. The challenging economic landscape calls for startups to be even more inventive and resourceful.
The question for your business
Are offshore professionals part of your strategy?
