Mostly research: Following the headcount cookie crumbs (May 2023 report)

The most important decisions a company makes are related to headcount.

There’s a famous saying in the tech world that:

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:

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:

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:

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.

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.

Despite the headlines regarding layoffs, the following Pre IPO tech companies are still making big moves on the R&D front (R&D is defined as open Product + Engineering headcount).

Grammarly is clearly thinking bigger than just spell check with this many product roadmap heads open.

Anduril is really on fire; it seems like the military demand is very strong due to the geopolitical issues and the war.

The following publicly traded tech companies are aggressively hiring GTM resources (Sales + Biz Dev + Marketing + CS).

The percentages are relative to current GTM HC, rather than overall company HC, and hence carry even more signal. Adobe surprises me the most, considering they’ve relied on Product Led Growth for so long. The same with Gitlab, who has long relied on a bottoms up approach to get into organizations by way of individual developers, and is now fortifying their Enterprise top down.

If I was a sales rep looking for my next landing spot, I’d strongly consider these companies, given the selling capacity they are trying to spin up.

The following publicly traded tech companies are aggressively expanding their investments in IT headcount.

Should you be selling into them?

I always expect Salesforce to be hiring IT folks, but this number is head and shoulders above the rest, especially when you consider the recent layoffs they made. If they are running a one-in, one-out headcount strategy, requiring teams to fire in order to hire, it’s interesting that they are opting to prioritize so many IT hires at this time.

What’s more, two vertical SaaS companies - Veeva and Autodesk - jumped out as forward leaning in this category. Security and compliance are not just for large, horizontal incumbents!

OneTrust and DataBricks jump out, as they have been rumored to be IPO candidates looking to make a splash. Ramping these GTM resources would help to ensure they can meet their sales goals immediately after IPO’ing. Both have a heavy Enterprise sales motion, so if you are an AE in that area, these could be companies to explore.

Snowflake, a close competitor of DataBricks, did not make the top 15 list here.

Usually you would expect a buyout firm to cut headcount to the bone after taking a company private. And just like clockwork, Coupa announced this week that they would be cutting jobs as a part of a “Company reset strategy.”

I do wonder if Cornerstone LMS or Mimecast could be looking to go go public again within the next 18 months, rather than selling to another financial partner, given their healthy hiring clip.

Toast, Samsara, and Procore continue to accelerate their annual headcount growth. In particular, Samsara and Toast are still growing revenues more than 50% year on year at scale, so investing in headcount at this rate makes sense.

On the other hand nCino, who’s stock is down 9% YTD, continues to trim headcount, and Mindbody downsized their staff back in November of 2020.

We’ll be back with another report at the close of June to update you on the latest headcount trends. If you know any investors, equity analysts, CFOs or sales reps that would benefit from this headcount data, share it with them so they can subscribe and get on the list.

A big thank you to my friends at Convequity and Matt Harney for their reviews and insights. I’m lucky to know thought leaders!