Researchers from Harvard Business School and INSEAD said in a working paper published in June that AI-native startups are building smaller, flatter organizations while hiring fewer entry-level workers and more experienced technical talent than traditional startups.
The study, titled “AI-Native Firms,” analyzed Y Combinator startups from 2020 through 2024 and a broader group of U.S. venture-backed companies founded during the same period. The researchers defined AI-native firms as companies that use artificial intelligence both to improve employees’ productivity and to embed AI directly into the products they sell.
The researchers found AI-native startups are about 25% smaller than comparable non-AI startups while employing roughly 13% more engineers. They also have about 15% fewer entry-level employees and managers, while the share of senior workers is about 20% higher.
Despite operating with smaller teams, the companies achieve valuations similar to non-AI peers, suggesting they generate more value with fewer employees.
Changing Hiring Patterns
