Levels.fyi: median base-salary offers for US software engineers at VC-backed startups have risen 25% to $200K since 2022; total compensation has risen just 18%
Young tech companies once might have complemented lower salaries with generous equity packages. Now they're upping base pay.
Context & Ripple Effects
Startup compensation had already been moving away from ownership: Carta found that workers were receiving materially smaller equity grants while average salaries were essentially flat through 2024. The new Levels.fyi data shows the cash side has since become the main source of offer growth.
This also follows the earlier large-company pay reset, when Amazon more than doubled its maximum corporate and tech base-pay ceiling amid competition for technical talent. For VC-backed employers, higher base pay narrows a historical cash-pay gap without producing equivalent growth in total compensation.
First-order effects
- Software-engineer candidates at VC-backed startups receive higher guaranteed cash compensation, while the slower rise in total compensation makes the package more base-salary weighted.
- Startups hiring these engineers face a larger recurring payroll commitment per hire, rather than relying as heavily on prospective equity value to close offers.
Second-order effects
- Cash-rich startups can more readily sustain competitive offers; firms with tighter financing may need to reduce hiring volume, narrow roles, or differentiate through non-cash terms rather than simply matching salary.
- The shift weakens equity’s role as the primary recruiting offset, reinforcing the pattern in Carta's reported decline in startup-worker equity grants and making compensation comparisons more focused on cash certainty.
Third-order effects
- If sustained, startup engineering compensation may converge further with large-tech cash-pay norms, raising the fixed-cost threshold for venture-backed companies before they reach durable revenue.
- The result could be a more bifurcated startup labor market: well-funded companies compete on salary, while less-capitalized employers depend more on mission, flexibility, or upside that candidates may discount.
The trend: Venture-backed tech hiring is shifting from equity-led upside to cash-led competition, increasing the importance of financing capacity in talent acquisition.