Mostly research: Following the headcount cookie crumbs (May 2023 report)
Mostly research: Following the headcount cookie crumbs (May 2023 report)
Headcount as a leading indicator of future revenue (and ambitions)
The most important decisions a company makes are related to headcount.
There’s a famous saying in the tech world that:
“You either build the product, sell the product, or help the people doing the first two things do them better.”
In fact, +70% of all dollars spent at SaaS companies are on headcount. Therefore, hiring is a leading indicator of future topline growth (or contraction).
In other words, headcount tells you where the puck is going.
And even better, if you can track headcount patterns at the departmental level you can detect more nuanced signals about a company’s future revenue (and ambitions).
For example, if a company is adding lots of sales, biz dev, marketing and customer support people, it usually means they are expecting topline growth and must build capacity to support anticipated demand.
Generally speaking:
Increasing Go to Market headcount (Sales, Biz Dev, CS, Marketing) is a bullish signal on topline prospects and a validation of management’s confidence
Increasing R&D headcount (Product, Engineering) indicates a company is investing ahead of it’s technical roadmap, and potentially moving into new areas
Increasing IT headcount may indicate a company is undergoing a digital transformation, and could be a big software buyer in the coming months
Here at Mostly metrics we track the headcount patterns of 339 technology companies on a monthly basis. 104 are currently publicly listed and 235 are currently privately held.
More specifically, we tag companies across the following characteristics:
Public vs Private
Sector (e.g., security, development, finance, HR etc.)
Business model (e.g., field sales, PLG, channel)
Pre IPO candidates
Vertical software
Take private
PE owned
In short, there’s a lot of money to be made for those who can spot patterns ahead of time - whether that be as an investor, a seller of technology, a CFO benchmarking their own company’s staffing model, or an employee looking to land their dream job.
In this post we’ll cover the top signals coming out of our May headcount data.
What you’ll find in this report:
OpenAI grew headcount more than 100% in just two quarters
Wiz is adding headcount when other cybersecurity players are making deep cuts
Cloudflare continues to put the pedal to the medal
Grammarly and two other Pre IPO companies are hiring lots of Engineers
A surprise publicly traded privacy and security player is scaling quota capacity
Salesforce has over 350 IT roles open?!
Anduril is on fire; military demand remains strong due to the geopolitical issues
A PLG player is hiring massive Sales heads, perhaps signaling a shift in GTM
Two recent take privates actually increased headcount Y/Y after being bought out
Toast, Samsara and one other well known vertical SaaS player are adding heads
OpenAI doubled HC in just 6 months. And Wiz picks up the pace as other cybersecurity companies make cuts
Rumors are that Notion could be making its leap into the public markets as soon as the IPO window opens back up. They’ve no doubt seen a huge increase in use cases (and revenue) since adding AI to their core offerings this year.
And unsurprisingly, right in front of Notion, is OpenAI, the engine powering both startups and incumbents looking to make their offerings “smarter”.
I find it very telling that both Ramp and Navan make the list, two B2B payment management platforms, perhaps signaling that CFOs are investing heavily in expense visibility in this economic climate to ensure they keep OPEX under control.
On the cybersecurity side, Wiz shows no sign of slowing down, after becoming one of the fastest companies to reach $100M in ARR. They are clearly putting their new Series D money to work, after adding $300 million in February from Lightspeed Venture Partners and Greenoaks Capital Partners. Wiz has some close cloud security startup peers like Aqua, Orca, and Sysdig who have not invested as heavily in headcount during the same time period.
Cloudflare speeds up when others slow down
This chart illustrates public tech companies with open roles representing 10% or more of their current existing headcount (calculated as Open Roles / Total Current Headcount). Hiring for more than 10% of your current footprint at any given time is perceived as a bullish, confident signal by management.
Cloudflare, who sits in the top 5 in terms of EV / Revenue valuation multiples, is continuing to invest ahead of it’s growth.
A surprising one that makes the top 15 after a poor earnings report is SentinelOne. It sounds like they will be reducing 5% of staff in order to support bottom line improvement, as they’re still burning cash. Expect that open role number to come down next month.