To poach top AI talent, startups are starting to spend real money.

Key Highlights

High-growth AI startups are offering significantly higher cash compensation and more liquid equity to attract top talent.

Now is a great time to join a startup.

According to a recruiting firm that arranges job placements for MIT graduates, the entry-level software engineer role this new graduate landed comes with an annual salary of up to $220,000, which does not include any equity.

For years, the typical startup model has been relatively low base pay paired with rich but uncertain equity packages—whether the equity ultimately pays off depends on whether the company gets acquired or goes public. The logic is to motivate employees to stay long-term with the possibility of striking it rich overnight in the future.

But now, with high-growth artificial intelligence startups holding large amounts of venture capital funding—and with competition in the talent market reaching a fever pitch—companies are rolling out offers with a higher cash component, and their incentive packages are getting increasingly unconventional.

“All of us want to poach people from a limited talent pool,” said Zhang Michael, CEO of the recruiting company Candidate Labs. “Compensation levels are continuing to rise.” The company has placed talent with startups such as Cursor and Vercel.

“Pay that once would have been jaw-dropping a year ago is now something many newly funded startups think is only natural—they just set the price at that level,” he added.

Many startups are trying to keep teams lean and highly effective, so they have to hire the very best of the best. Recruiters say this is creating a split in the tech industry: candidates in the top 5% to 10% receive all the offers, while everyone else struggles to find jobs.

“Ten-times productivity talent, industry benchmarks—those phrases are on everyone’s lips now,” Zhang Michael said. “Companies only want the very top.”

Pay Scale Watch

The salary data platform Levels.fyi shows that, since 2022, the median base salary offered to software engineers by venture-backed startups has risen from $160,000 to $200,000—a 25% increase. Over the same period, those companies’ total compensation (including equity) increased by 18%.

Other high-paying roles include top-tier sales representatives, product managers, marketing professionals, and client-site deployment engineers—these engineers are stationed at the customer’s location to help guide the customer in using AI products.

In addition to high base salaries, Zhang Michael has also found that many companies are starting to offer profit-sharing agreements. For example, if someone is responsible for a specific business line, the company may promise to give them 4% of the business line’s profits.

Chris Baskes, CEO of Quantum, a recruitment agency that builds teams for high-growth startups, said it’s no longer uncommon for the total cash compensation of employees in some startup roles to match that of senior employees at large firms like Meta and Google.

“Before this, I basically never saw a seed-stage startup offer a base salary of more than $300,000,” Baskes said, and now, “they can offer cash compensation at the same level as FAANG (Facebook, Amazon, Apple, Netflix, Google).”

He has also started to see performance-based cash bonuses at a handful of companies: after employees hit a target for a particular project, they can receive a cash award equal to 30% of their annual salary.

He said some top university CS graduates, even with just one or two years of experience at leading companies, can land base salary offers of $250,000 to $300,000; and just a few years ago, base pay for these positions was only around $170,000. Baskes added that a math competition winner with only 9 months of experience received a $400,000 base-salary offer for a software engineer role.

Equity Is Easier to Cash Out

Previously, startup employees had to wait until the company was acquired or went public before they could cash out their equity. Now, through equity repurchase offers, employees can cash out earlier—investors directly come in to buy employees’ equity. Such offers have existed for some time, but they have become more common in recent years.

“Most late-stage, private companies you can think of have set up some form of equity cash-out program for employees,” said Zohayel Musa, a cofounder of Levels.fyi. Once one company does this, other companies feel compelled to follow due to competitive pressure.

In addition, some startups have even completely done away with equity vesting cliffs, meaning employees receive equity immediately upon joining.

Hiring Hospitality Upgrades

Ries Hughes, partner for executive talent at GV (formerly Google Ventures), said that in a tight talent market, top-tier perks in hiring are no longer only for executives.

Hosting candidates at upscale restaurants, sending flowers to thank them—even candidates at the client-account-manager level can enjoy these kinds of待遇.

Of course, throwing around so much money has downsides too: retention gets harder. Equity that used to take years to vest was effective for keeping employees; the faster you get the cash in hand, the harder it is to retain them long-term.

“It’s a bit like coming for the money, and leaving for the money,” he said. If startups are constantly splashing cash, they then have to rely on company culture to keep people.

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Responsible editor: Guo Mingyu