2023 was the year that a boom met a dip. The layoffs that increased throughout 2022 crested into last year—totaling 262,735 workers impacted in 2023, according to layoffs.fyi. And yet, despite ongoing layoffs for many, we also experienced an AI boom. 2023 was our first full year in the new AI era—ChatGPT launched in earnest in November 2022—and we’re just starting to see how AI may be integrating into business and hiring decisions.
Alongside these highs and lows, we’ve also experienced a notable debate about where we work, with many companies shifting away from the pandemic remote work norms. 2023 was certainly a shift in how talent and tech engage with one another, on many levels.
We dove into our venture capital firm’s talent data to uncover what’s actually happening across the tech industry. We found big shake-ups in where talent is moving, Gen Z's career paths, and where to find AI experts:
- Austin is the fastest-growing city for top tech talent by percentage.
- New York City is gaining the biggest share of relocating tech talent.
- Silicon Valley is losing the biggest share of relocating tech talent, but is still growing in net head count.
- Gen Z talent is being promoted to management slower than past generations.
- Gen Z workers switch jobs 2x faster than those in Gen X.
- VC-backed founders are older than a decade ago, with the oldest in sectors like life sciences and cybersecurity.
- Data is maturing from an analyst- and scientist-centric role to an engineering-focused discipline.
- As demand for AI talent grows, a declining percentage of AI hires have graduate degrees or prestigious schooling.
- Silicon Valley still hosts the most AI talent, benefiting from the recent AI startup boom.
We close out the report with predictions for the future, and what founders should do to stay ahead of the curve.
Our source: We used SignalFire’s own AI engine, Beacon, which we’ve been refining since our launch in 2013. Beacon tracks more than 600 million employees and 80 million companies to guide our investing, assist portfolio companies with scaling their teams and revenue, and gather the key insights for this report.
Everything’s bigger in Texas, and the Big Apple is seeding new opportunities
The San Francisco Bay area has been the undisputed center of technology for decades, and it still reigns supreme. However, the pandemic and its impact on remote work resulted in a diaspora for tech companies and their workers, revealing a shift toward other growing tech hubs. In this section we’ll share the top destinations for tech worker relocations and how founders can recruit top talent across the globe.
Talent trend #1: Everything’s bigger in Texas
Austin is rapidly emerging as a top-tier tech talent market
The old adage is true: everything really is bigger in Texas. We crunched the numbers and looked at city-by-city growth at top VC-backed startups, from 2019 pre-pandemic head counts to the close of 2023. Texas claimed two of the top three spots with Austin (up 23%) and Dallas (up 19%).
Talent trend #2: The Big Apple gets bigger
Tech talent flocked to New York City from across the country
Overall population trends in the post-pandemic period were largely driven by people entering and leaving the tech workforce as the 2021 boom was followed by years of layoffs.
But once people have tech jobs, where do they prefer to live?
One way to home in on these preferences is to look at the subset of existing tech workers who relocated between 2022 and 2023. The data below gives the change in each city’s population among this moving subset, where a city’s net gain or loss is determined by the difference between the number of people who moved to that city and the number of people who moved away from it.
On this measure, NYC tops the charts, taking in nearly twice as many relocators between 2022 and 2023 as runner-up Austin and claiming 15% of all people who moved. The biggest losers include some of the most notable tech hubs, including San Francisco, Seattle, and Boston, and many posit this is due to the high cost of living in cities like these compared with emerging cities like Austin. However, that does not properly tell the story, with New York City boasting the highest rent prices in the country yet attracting the largest share of relocators during this time period.
Talent trend #3: The Silicon Valley startup exodus
The Bay Area is still growing its tech head count, but it's losing talent to NYC and Austin
There are two key aspects to the movement away from San Francisco Bay Area startups during the past five years. The first relates to a shift to big tech during that time period (remaining in the Bay Area), and the second relates to a physical relocation to tech startups in other locations.
One hypothesis for why tech workers may have shifted to big tech over the past five years: the former reputation for FAANG companies and other big tech to be a safe and secure career move compared to a fledgling startup—until the massive layoffs in 2022 and beyond. We postulate the trend of startup talent shifting from startups to big tech as a “safe move” is long gone and VC-funded startups are in a strong position to recruit from this same talent pool.
By net change as a percentage of all San Francisco Bay Area relocators, the most common move was to NYC, and NYC also received new residents from Seattle and Boston. What’s clear is that cost of living doesn’t purely incite these moves; NYC is in the midst of a tech talent boom.
Location hiring tips for founders
If you’re just starting out, consider basing your company in Austin, NYC, Seattle, or Dallas to take advantage of these geo-movement trends. These tech hubs have an influx of talent, many of whom work in big tech today but who may be more open to VC-backed startups in the wake of big tech’s layoff instability.
If you’re struggling to find local talent, consider entities in growing secondary hubs, either as remote talent optionality or by creating a hub and spoke model. To get distributed hiring right, check out our WFH FAQ guide on remote work.
The ABCs of Gen XYZ
Talent trend #4: Gen Z doesn’t want to be your manager
Gen Z has less room or less intention to move beyond individual contributorship
It may be growing less and less appealing to younger generations to take the manager track at work. When Gen X was four years into their careers, 7% of the generation had already moved upward into management positions, compared with only 2.8% in Gen Z today. In this section we explore our hypotheses for why Gen Z is less likely to become a manager compared with Gen Y or Gen X.
First, this generation has experienced a most unsteady macroeconomic entrance into the workforce, experiencing a global pandemic, The Great Resignation, and a layoffs peak—all within their first four years. The data is clear they job hopped at double the rate of their older generational counterparts: Gen Y on average worked an average of 2.2 jobs over the first four years of their career, compared with Gen X holding on average 1.1 jobs over the first four years of their careers, respectively.
Regardless of job hop by choice or by layoff, it is likely that Gen Z has built a different, more transient relationship with employers. It’s possible that they simply don’t stay with one company long enough to reach promotion, or they would rather explore all of their options more fully and management doesn’t top that list. Another hypothesis is that Gen Z is entrepreneurially motivated through side hustles or the gig economy to gain additional economic streams in an unsteady full-time work environment.
Regardless of the reason, what we’re seeing is that fewer Gen Z workers are taking the management track, and if that trend continues it could fundamentally create a labor shortage in management in a few decades as they mature into the more senior working generation.
Talent trend #5: It’s an age old question, why does Gen Z change jobs more quickly than X or Y?
Gen Z's fresh graduates held twice as many different jobs in the first four years after college as Gen X did
Above we explored the many reasons Gen Z isn’t moving into management positions, and one prominent reason supported by data is the frequency at which they change jobs, regardless of the reason.
There are many reasons for job changes over the past few years, be it The Great Resignation of 2021 or the layoffs of 2022 until now. Gallup and others have been pointing to Millenials as the “Job Hopping Generation” because they change jobs at a far greater rate than their predecessor generations. However, Beacon data surfaced from the past two years shows that Gen Z is even more quick to jump from one job to another.
The chart below reveals that Gen Z employees both leave jobs at an earlier time interval than their older counterparts and hold more jobs within the same time period.
Because most people experience their first management job as a promotion within the same company, one theory as to why Gen Z isn’t moving into management could be that they aren’t staying long enough to experience promotions. Regardless of promotion to management or to more senior individual contributor positions, this may create some stagnation in upward mobility for Gen Z and an even greater friction in the relationship between employers and Gen Z.
Talent trend #6: Venture-backed founders today are older than before
VC-backed founders are now twice as likely to have 15–20 years of experience versus a decade ago
We are in the beginning stages of a founder boom, where the increase in layoffs mixed with the increase in new technologies to build business upon (AI, no-code/low-code, etc.) create space for a new cohort of founders to start companies.
We compared the age and years of work experience of today’s cohort of venture-backed founders compared to the last major generation 10 years ago and found that founders are trending significantly older now. The majority of founders in 2013 had 10 or fewer years of experience, and today most founders have 5–20 years of work experience prior to starting their company.
This could be because of the rise in B2B SaaS businesses and the benefit of work experience in founding in this sector, compared with the rise in consumer products we saw during the first 15 years of the century. It could also be because of the large-scale numbers of experienced tech workers laid off in the past two years who founded a company when they didn’t find another role. It could also be because experienced founders are returning to found another company in the wake of AI. No matter the reason, the youngest generation of workers (those with less than five years of experience) aren’t founding venture-backed companies at nearly the rate their older counterparts did a decade ago—generational differences abound between the actions of Gen Z and earlier generations.
Generational hiring tips for founders
Founders should anticipate the needs of the Gen Z workforce in order to retain them beyond the first year. One systemic way to do this is to create clear career pathways for the individual contributor talent track to incrementally advance their career within your company so they see progressive advancement over time, regardless of aspirations for management. Additionally, founders should consider implementing a 10% time program to spark innovation and freedom and keep Gen Z excited about ways to contribute to the company outside of their normal job duties.
And a pitch for the older generations: founders should also consider hiring more diversity by age. Research shows that older workers increase your total talent pool and create more productive businesses, and older workers are more likely to be loyal to your company for a longer period of time.
Spotlight on AI: The data is in
Talent trend #7: Data engineering is on the rise
Data engineer has eclipsed data analyst as the top data-related role
Headlines abound about advances in AI technology—but there should be a subheader that underscores the critical role data plays in the equation. Data engineers in particular are vital for AI's advancement, focusing on collecting, cleaning, and preparing vast amounts of data necessary for AI models.
Talent trend #8: AI-vy League > Ivy League
The highest concentration of AI talent is now at top startups, not tech giants and prestigious universities
Many companies looking for AI/ML talent typically list requirements for top-tier CS programs at the graduate level, but this is simply not the reality when considering who is actually hired. Even amongst scientists and researchers, less than half of all hires have a graduate degree, and only about a third of ML engineers have a graduate degree at all, let alone a PhD.
In fact, the top AI talent is concentrated (with and without degrees) at a set of nine AI companies SignalFire has coined the AI-vy League. Companies should think twice before making graduate degrees requisite for their open roles; this can detract from the applicant pool of qualified individuals and have adverse consequences for diversity and equity efforts.
Talent trend #9: Silicon Valley still wins for AI talent
A new gold rush of AI startups is reinvigorating the San Francisco Bay Area
While there has been an exodus from Silicon Valley for tech workers over the past five years, it is still number one when it comes to volume of AI talent. NYC may be stealing tech talent more broadly from the West coast, but it has a long way to go in order to catch up to the sheer volume boasted by the SF Bay Area and San Jose, California.
Interestingly, there is also a high concentration of this talent in places founders might not expect: from Pittsburgh, Pennsylvania to Portland, Oregon, companies can find relevant AI talent for their open roles without competing with major tech hubs.
AI hiring tips for founders
While the supply and demand mix mostly favors employers in this current jobs climate, AI talent is the exception and is in extremely high demand. Companies that can hire remotely should consider alternative locations and flexible working conditions to attract top AI/ML talent from the other concentrated cities listed above. Additionally, staffing the team properly so a data scientist can be 100% data scientist and ML engineer can be 100% ML engineer—compared with covering for other teams with an expansive generic engineering remit—will go a long way.
Also, your best talent might already be on your team. Companies like Modal Learning give existing teams the skills to advance to becoming data engineers and data scientists, so companies not only gain these critical capabilities without hiring externally but also nurture the career growth of their employees.
Future predictions
The emergence of new job categories
A lot of headlines today ponder whether AI will displace workers, and the reality for most skilled workers is that it won’t displace a job but it will evolve it. With AI being integrated into many enterprise-ready workplace tools for productivity, collaboration, and more, the bigger question is what new jobs will emerge as a result of AI? I believe we will see a shift into subspecialties similar to the data shift we explored previously in this report, only with the security function. Today, there are CISOs and security leaders whose remit is very broad, and given the myriad cybersecurity dynamics that stem from AI’s powerful capabilities, I predict we’ll see new subspecialties emerge within security teams and much more intentional hiring in this functional arena, similar to the way data exploded over the past five years.
Founder tip: Organizational design isn’t only about org charts, it’s the art and science of designing organizations that can make decisions and execute effectively. Do you have the right roles organized in the right ways to help your organization drive key results forward? Check out our People Fundamentals guide, which highlights tips for organizational design and more people fundamentals to get right within your company (especially if you don’t have an HR leader yet).
Remote work will rise again
In this economy, where there is a surplus of talent impacted by layoffs, the Return to Office movement will continue to gain ground with the upper hand in hiring, but as the tides turn back to a candidate-centric market in future years, those companies that have built flexible foundations to support remote work will have a long-term upper hand.
Founder tip: Build remote-ready companies to be successful in any workplace modality. Consider SignalFire’s WFH FAQ guide to strengthen the remote aspects of your workplace (even if it’s just what happens when someone WFH for a one-off) so that, should you need to shift strategies to attract talent in 2025 and beyond, you’re ready.
Fractional is the future
Much of the layoffs of 2022 and 2023 stem from an overhiring response to the Great Resignation of 2021. Companies are getting wise to the fact that workforce needs come and go, and the pivot from fast hiring to fast firing is painful. Moreover, Gen Z has completely different views on the relationship between workplace and worker than their peers of previous generations, and the dynamic and transient nature of consulting and fractional work is an appealing construct. There will be an increase in fractional and consulting work for key roles in companies during this period of economic uncertainty for startups, and we believe that fractional and temporary work is here to stay.
Founder tip: Build a hiring plan to better forecast full-time hiring needs and get clear on when temporary or fractional work suffices.
About SignalFire
SignalFire is the first venture capital firm built like a technology company to better solve for the needs of founders. The core of its value-add is Beacon, the AI engine SignalFire has been refining since the firm's launch in 2013. Beacon tracks more than 600 million employees and 80 million companies to guide the fund’s investing and assist portfolio companies with scaling their teams and revenue. SignalFire also helps early-stage founders navigate the toughest parts of building a company at every stage, with expert advisors, 100 skill-building workshops a year, and an in-house team of recruiters, data scientists, PR experts, and go-to-market leaders. With over $2.1 billion in assets under management, SignalFire focuses on investing from seed to scale. The firm’s key sectors include AI/ML, developer tools, B2B SaaS, healthcare, cybersecurity, and consumer.
*Portfolio company founders listed above have not received any compensation for this feedback and may or may not have invested in a SignalFire fund. These founders may or may not serve as Affiliate Advisors, Retained Advisors, or consultants to provide their expertise on a formal or ad hoc basis. They are not employed by SignalFire and do not provide investment advisory services to clients on behalf of SignalFire. Please refer to our disclosures page for additional disclosures.
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