Startups have lately been trying to stay as lean as possible when it comes to head count. Now some are actually shrinking thanks to AI.
"We are four employees," says Simar Singh, co-founder of Butternut AI, maker of a no-code website builder. "We were nine at our peak."
At the end of last year, Singh and his co-founder laid off five engineers after determining AI agents could do their work-and do it 24 hours a day. The three-year-old startup has around 10,000 paying customers, and Singh says its products continue to grow.
Plenty of startups increase head count at a rapid clip as they aim for billion-dollar valuations and fight for top engineering talent. But a subset of early-stage founders is embracing an ethos derived from an extreme reliance on artificial intelligence: Stay small for as long as possible.
Before hiring, these founders are asking if AI can do the job instead. Some have laid off employees or cut ties with contractors and agencies because of AI. Time will tell if rising sales-or outside investors-force these startups to increase human head counts too.
Lindy, a startup with around two dozen employees, makes an AI "teammate" that plugs into customers' Slack workspaces. The company, which has raised $50 million, laid off a handful of people working in marketing in January as it pivoted its product.
The company has had half a million users to date, but even as its user base grew, the team maintained just two people in marketing, plus AI-agent helpers. While Lindy is still hiring coders, it never refilled the marketing roles.
"We've been able to cover all the surface area that we used to," says Haneen Azhar, a senior growth marketing manager at Lindy. "AI left and right."
Previously, a worker created dynamic marketing-data dashboards. "Now that's a prompt," says Azhar. "We don't need to be data engineers."
Lindy AI also used to pay five different creative agencies for things such as content generation and video production. "That number today is zero," says Azhar. "We've been using AI video gen."
The average head count of U.S. startups has dropped in recent years from a peak in 2021, according to LinkedIn analysis. Startups founded in 2022 with at least five employees in their first year had an average of just 20.7 employees by their third year. By comparison, similarly sized startups founded in 2018 had an average of 32.5 employees in year three.
Startup accelerator Y Combinator says the lean approach can yield success. Emergent, which went through its program in 2024, has reached $15 million in annualized revenue with 15 people. And Retell AI, which went through the same year, hit $60 million in annualized revenue with a head count of around 40.
AgentCollect, which uses AI agents for invoice collection, is down to around 30 employees from a peak of 50. Some of the roles that have been largely automated: billing coordinators, quality evaluators for customer calls and a product manager.
It isn't about cost savings, says Chief Executive John Banner, but a hiring philosophy based on the idea that employees should be doing work that requires creativity and judgment.
"This is the thing that as of today cannot be delegated to AI," he says.
Whether a company can remain tiny thanks to AI depends on the type of company, its product, and how quickly its revenue is growing, says Liz Wessel, a partner at First Round Capital who invests in early-stage startups. Those that are hyperscaling are still fighting for top engineering talent.
These days just two co-founders can build prototypes, get their products into the hands of customers and kick the tires of what they're building before needing to hire, says Aileen Lee, founder of Cowboy Ventures. But you can generally only grow your business so much before you will inevitably need to increase head count, especially in the enterprise space.
"If you are selling something that's $60,000 or $75,000, and selling it to midmarket or enterprise customers, they want to be buying from a company that has humans," says Lee.
How much money a startup gets from investors tends to affect how long they can go without adding employees. In order for a company to raise a series A, venture capitalists expect them to have $4 million to $5 million in revenue in their first year, she says, adding, "That's really hard to achieve with no people."
Advait Paliwal says he hasn't been meeting with venture capitalists yet.
He's operating solo, building a consumer mobile app that allows people to talk to a variety of AI agents. Paliwal considers his chief technology officer to be OpenAI's Codex.
"My entire setup now is 20 Claude and Codex subscriptions that I run instead of hiring employees," he says.
And while he's interviewed four different candidates for software engineering roles over the past year-including a 14-year-old in Belgium-he decided against hiring any of them.
"The amount of instruction I had to give them was the same amount of instruction that I could just give Claude," he says. "And it would just answer faster."
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