Aug 26, 2023 - Economy & Business

Equity comp has taken a hit with tech stocks

Illustration of a hand putting down coins.

Illustration: Aïda Amer/Axios

With more conservative (or as some would say, "sane") startup valuations, it can be a good time to get in at a lower "entry price" as an employee — but it's not exactly a free-for-all all either.

Zooming in: Not only has hiring been down this year compared to 2022, but employee equity packages are down as well, according to equity management software company Carta.

  • In fact, the equity portion of startup compensation packages declined more than cash salaries did from the first quarter to Q2 of this year (9% versus 1%), head of insights Peter Walker tells Axios.

By the numbers:

  • New hires (who are granted equity) across Carta companies in January 2022: 68,562
  • New hires (who are granted equity) across Carta companies in January 2023: 38,250
  • In Q2 of 2023, only 26% of startup workers exercised their stock options, the lowest quarter in the past five years — and tied for Q2 in 2020.
  • There's also been a significant spike in options repricing in the last three quarters, though that remains a rare benefit for startup employees. Only about 200 companies did that last quarter, according to Walker.

Between the lines: Tighter compensation packages compared to the recent boom times suggest that "given the slow pace of hiring, during the negotiation, the candidate doesn't have as much leverage," he says.

  • In contrast, when there's an abundance of startup funding, it's reflected in employee compensation and headcount growth.

The bottom line: The savviest of startup workers will be able to take the most advantage of this market.

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