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).
Generally speaking:
Increasing Go to Market headcount (Sales, Biz Dev, CS, Marketing) is a bullish signal on topline forecasts 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 334 technology companies on a monthly basis. 105 are currently publicly listed and 229 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 if you 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 July 2023 headcount data.
TL;DR: What you’ll find in this report:
OpenAI grew HC 33% m/m (accelerating from 11% in the prior month)
This month 210 of the 338 companies we track increased HC from June to July
This represents a significant increase from the 131 who increased HC from May to June, perhaps signaling we’ve made it out of the woods
Amongst pre-IPO companies, Ramp continues to hire, while Navan levels off after a period of hyper HC growth, falling out of the top 10 in our data set
Walkme walks headcount back by 6%
New Relic cuts staff before anticipated take private with Francisco Partners, TPG
Xero strives for profitability, decreasing headcount for the second straight month
Dropbox, C3.ai, DataDog, and Cloudflare recruit R&D talent for AI roadmaps
A surprise publicly traded cyber security player is rapidly scaling quota capacity
15 public companies have >50 IT roles open teasing digital transformation
Among pre IPO companies, Grammary, Deel, and…. Expensify??? are all scaling GTM headcount (for different reasons)
And more…
Among Pre IPO companies, openAI, Notion, and thinkific grew headcount more than 10% m/m
As a simple rule of thumb, growing 6% m/m is equivalent to growing 100% y/y. So all of the companies in the chart above are trending to at least double their headcount this year if they keep this pace up. That’s a bold statement in an environment that prioritizes efficiency over growth.
Both Ramp and Navan were on this list in the previous two research reports. While Ramp grew headcount 7% m/m and is still on pace to grow headcount by more than 100% y/y, Navan has since leveled off, falling out of the top 10.
Another company to fall off the list since last month is Remote, who makes it easier for companies to hire across the globe.
We’ve touched on Notion and OpenAI in past issues. They’re both linked at the hip in many ways, as OpenAI powers Notion’s AI offering. What’s amazing is how OpenAI accelerated their month over month growth from 11% (May to June) to 33% (June to July). This is a break-neck pace, especially since they now employ a base of ~1,700 total people.
Finally, keep an eye on Canva, who’s added 1,300 people in just one quarter, as they close in on 10,000 total employees.
Walkme hits the breaks on hiring, while New Relic makes headcount cuts ahead of take private
More than 226,000 people have been laid off in the tech sector so far in 2023 across more than 900 tech companies, according to the Layoffs.fyi tracker (an increase of 11,000 people m/m).
The impact of headcount cuts on run rate performance is hard to quantify for three reasons:
The results don’t immediately show up in the P&L. There are one time costs related to severance that actually cause a temporary increase in spend.
“In terms of severance, [Gitlab CEO] Sijbrandij said that all staff affected will receive pay through the “transition period,” plus a single payout equivalent to around four months base salary. He also said that staff will continue to receive healthcare for six months in locations where that is part of their package.” - TC
The teams who experienced cuts need to stabilize and may not be as efficient in the short term as they reorganize (and re-motivate)
It’s common for orgs to backfill roles they just cut with different functional roles elsewhere in the org as they shift to a different strategy
Net, net: Yes, there should be some sort of OPEX run rate adjustment for companies who make cuts - just probably not as much as you’d think.
WalkMe made the deepest cuts m/m within our dataset. Their stock price follows a similar trend, halving over the course of the last year, despite growing TTM revenue more than 20% y/y.
Source: Pitchbook
Gitlab and Github, two leading developer platforms, both decreased their total headcount by 3% last month, but don’t appear to have made further cuts in July.
Xero’s decline reflects their emphasis on improved profitability (recently announced 15% overall headcount reductions) under their new CEO. This continues to work through our data set through the month of July, with a similar decline this month of 2%.
New Relic appears on the list again, which coincides with their recent take private announcement:
As reported by CNBC, TPG and Francisco Partners were able to salvage a deal that initially fell through months ago after securing enough debt financing to meet New Relic’s desired valuation. Major shareholders, including founder and executive chairman Lew Cirne and activist hedge fund Jana Partners, have signed off.
Under the terms of the agreement, New Relic will have a 45-day “go-shop” period during which it can entertain offers from other qualified bidders. But should it close as proposed — likely in late 2023 or early 2024, subject to customary closing conditions — New Relic shareholders will receive $87 per share, a 7.5% premium over the stock’s closing price on Friday.
If you recall, in 2021 New Relic underwent a restructuring plan to move away from a software subscription sales model to a consumption-based model, which included laying off nearly 160 employees.
Among Cyber Security companies, Egnyte, Okta, and Fortinet hire the most m/m
Of the 33 security companies we track (both public and private) 21 increased headcount month on month, and 11 increased headcount by a full 1% or more. This is a positive signal, as many hyper growth security companies made significant cuts in the preceding six months, after experiencing a decline in license count growth at the customer level.
Cloudflare, Blackbaud, and Dropbox are looking for new employees
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.
What struck me is that Gitlab seems to be bouncing back after recent layoffs. Perhaps their RIF was more performance related than capacity related.
Cloudflare has appeared in the top three of this list in all prior months of our report.
Among publicly traded companies, Dropbox, Cloudflare, C3.ai, and DataDog are scaling their R&D headcounts to fuel AI roadmaps
Despite the headlines regarding layoffs, the following Public tech companies are still making big moves on the R&D front (R&D is defined as open Product + Engineering headcount).
C3.ai is riding the AI wave. Their stock has tripled in the past year, from $12 a share to $36.
Source: Pitchbook
Dropbox is also positioning itself for the changes AI brings. According to Dropbox CEO, Drew Houston:
“I’m determined to ensure that Dropbox is at the forefront of the AI era, just as we were at the forefront of the shift to mobile and the cloud. We’ll need all hands on deck as machine intelligence gives us the tools to reimagine our existing businesses and invent new ones.”
-Drew Houston, Dropbox CEO
After culling the herd in April and May by 16%, Dropbox is now recruiting engineers and PMs to help execute on that product pipeline.
Source: Pitchbook
Since the close of March their stock has increased from $19 to $28 a share (+47%).
Adobe, Palantir, and … Expensify? Are adding GTM Capacity
These are the publicly traded companies that increased their GTM headcount m/m within our dataset.
GTM resources are defined as Sales + Biz Dev + Marketing + CS.
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 ramp.
Adobe’s PLG motion is markedly different than Palantir’s federal focused, field sales motion, so each attract different types of reps.
Expensify jumped off the page, as their stock price fell 29% over night. I’d suspect they are going to walk back some of these open roles after withdrawing their guidance for the remainder of the year.
Fortinet continues to invest in digital transformation
The following publicly traded tech companies are aggressively expanding their investments in IT headcount.
Do you sell backup and recovery software, critical infrastructure, or cybersecurity? Should you be selling into them?
Fortinet leads the pack, followed by Veeva (vertical software for the pharma industry), VMware (now owned by Broadcom) and then Salesforce.
In the private space, Grammarly, Deel, and Databricks are aggressively building quota capacity
The following pre IPO tech companies are aggressively hiring GTM resources (Sales + Biz Dev + Marketing + CS).
Deel has 103 sales positions, 16 CS, 8 biz dev, and 6 marketing roles open.
Grammarly has over 100 sales positions and 46 marketing positions open to close out July. The 100 sales positions would more than double their current total sales headcount if they were all to be filled.
We’ll be back with another report at the close of August 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.
