The Startup Muster that dropped in December 2025 came out with this headline finding: the average Australian startup now employs 4.2 people, down from 8.2 just twelve months earlier.
We know earlier stage startups are hiring more strategically but to nearly halve in a year is huge. That's the most recent read we have on the ecosystem heading into 2026, and it's the theme of all our hiring conversations - whether it's with clients or people within the Aussie Founders Club community. Revenue, output and ambition all kept moving the other way.
If this is starting to sound like 2023's cost-cutting story coming back round, it isn't. The companies running leaner are the same ones raising the biggest rounds. Australian startups raised $5.4 billion across 390 deals in 2025, the third-biggest funding year on record according to Cut Through Venture and Folklore Ventures, but that was 17% fewer deals than 2024. The capital didn't disappear, it concentrated and the top 20 rounds took 58% of it.
So we've got more money flowing into a smaller number of much smaller companies, and the ones at the front of the pack are the leanest of the lot.
The obvious read is that AI explains everything - and it explains a lot, but not all of it.
The AI-native outliers are doing genuinely strange things to the productivity benchmarks. Cursor reportedly hit US$300m ARR with around 20 employees, which works out at US$15m a head. Midjourney is at roughly US$200m with about 10 people. The top ten AI-native startups average around US$3.48m in revenue per employee, six times the SaaS average. Numbers like that change what "normal" looks like for everyone else.
What I think matters more is what's happening below the unicorn line. Investors are pricing capital efficiency directly into early-stage rounds in a way they weren't 18 months ago. The median Australian Series A is now $11m, which gives founders 18 to 24 months of runway and a board that wants leverage rather than headcount. The growth-at-all-costs idea died at the top of the market and has been quietly working its way down ever since.
And then there was Atlassian. In March, Mike Cannon-Brookes cut around 1,600 jobs (about 10% of the company) and his memo to staff included the line, "It would be disingenuous to pretend AI doesn't change the mix of skills we need or the number of roles required in certain areas." I had a few conversations across the startup community that week. They didn't all agree with the move, but they'd all read it - time will tell as to whether they rehire, but as a business who used to pay above market rates and kind of ruined it for other businesses, I wonder if the cost cutting will flow into salaries of new hires?
The biggest shift across the briefs landing on our desk is the bar founders are now setting for each individual hire. It's was tight last year but its gotten even firmer. Founders who were already careful in their hiring (we look after startups afterall) are being more deliberate about who they bring in, more specific about what they need from them, and much less willing to compromise to fill the seat quickly.
Part of that is about the shape of the role. Fewer Heads of Marketing roles, more for what I'd call a first marketer (and the same in engineering, product etc etc). Someone who can write the strategy, ship the campaigns, set up the stack, and eventually hire their own replacement. People who can build something from nothing rather than scale something already built and know how to use AI to figure out the problem.
Part of it is the stakes. When you're a team of four and you add a fifth, that person is 20% of your culture, your runway and your velocity. Get it wrong and you've burned three months and a hundred grand. Get it right and you've moved the trajectory of the company. Founders know this, we know this, and the bar reflects it.
A few things follow.
Hiring isn't really a function you can delegate at this size. The People Ops playbook built for a 25-person team doesn't map onto going from 4 to 6. Every hire is the founder's call, and the founder needs to be in the room for it.
The cost of a wrong hire has gone up sharply. A bad hire on a 30-person team is a setback. On a 4-person team it can take you out. "Let's just see how they go" is now usually more expensive than waiting another six weeks for the right person. We personally use TALY to go deep on insights re role and company fit with our clients and new hires.
The candidate side has shifted too. The best operators in Australia know this is the sharpest market they've ever sold their time into, and they're being picky about which founders they back and which problems they want their next two years tied to. Strong founders, clear vision and meaningful equity matter more than they did when there were ten openings on the same street.
The startups that come out of this cycle in good shape won't be the ones with the biggest teams. They'll be the ones where four people are doing work that used to take twelve.
That's roughly the bar now.
Which brings me to next week. There's been a few headlines lately where it's been announced that we are punching above our weight in Australian startups. I don't buy the headlines as it is. The returns per investment dollar look strong, but is that because they're concentrated in a small handful of companies. Musings on this soon!
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