- AI-native firms run 25% smaller than traditional startups, with 15% fewer entry-level workers and 15% fewer managers, according to a recent study from Harvard Business School and INSEAD.
- The researchers analyzed close to 50,000 Y Combinator and PitchBook-listed venture-backed startups and found hierarchies at AI-native companies were also flatter — all while maintaining the same value as their non-AI-centric counterparts.
- Smaller AI firms raise similar amounts of funding and hit valuations on par with non-AI-native firms, raising roughly 20% more capital per employee and carrying higher valuations per employee.
- Among the Y Combinator launches, AI first-deal counts in 2024 are nearly eight times the 2020 average, according to the researchers.
- The share of engineers in AI firms is 13% greater than in non-AI startups, emphasizing a focus on technical talent.
- 43% of AI firms use AI to fully automate tasks, while another 24% build AI tools designed to augment existing workers.
AI-native firms are redefining startup dynamics, operating with 25% fewer employees than traditional counterparts while achieving similar valuations. Research from Harvard Business School and INSEAD indicates these firms have 15% fewer entry-level workers and 15% fewer managers, leading to flatter hierarchies.12
The study analyzed nearly 50,000 Y Combinator and PitchBook-listed startups, revealing that AI firms emphasize engineering roles, with a 13% higher share of engineers compared to non-AI startups. This shift allows them to maintain value while operating with smaller teams, raising 20% more capital per employee and achieving higher valuations per employee.
According to researchers Hyunjin Kim and Rembrand Koning, “AI may not simply make existing organizations more efficient – it may change what organizations look like and do.” They noted that 43% of these firms fully automate tasks, while 24% augment existing roles with AI tools. This trend suggests a future where companies may not need to post jobs, as traditional roles are being engineered out.
The findings indicate a concentration of these smaller firms in Silicon Valley, employing a workforce that is more male and likely to hold advanced degrees. As AI continues to evolve, the managerial focus may shift from building internal capacity to integrating external capabilities, fundamentally altering the landscape of work.
“The study analyzed nearly 50,000 Y Combinator and PitchBook-listed startups, finding AI-native firms have 13% more engineers and raise 20% more capital per employee. Kim and Koning note that 43% of these startups fully automate tasks workers used to do, while another 24% build tools to augment existing workers.”
Forbes
