And, yes, on calls or conducting interviews, I actually use the phrase “kinda weird.” It’s informal and inexact, but it’s a characterization I stand behind. This market seems to be filled with contradictions and in-betweens: We’re on the right side of a bust without having yet entered a boom. Interest rates remain higher than anticipated, revealing both resilience and fragility in the ecosystem. And, depending on who you talk to, there are either too many venture dollars out there or too few, as LP pocketbooks close off. So, it tracks that, if it’s an uncertain time for founders and VCs, that would be equally (or more) true of startup employees. 

“The [talent] market’s in a super weird place right now,” said Atli Thorkelsson, VP of network at Redpoint Ventures, which just published its State of Talent report. 

The report includes new data that suggests that startup life has perhaps lost some of its sheen: For the first time in at least five years, overall headcount at venture-backed startups declined in 2023. It’s not that startups aren’t hiring or that people are leaving en masse, per se.

“It’s just that hiring was so slow for replacements,” Thorkelsson said. 

Naturally, there is one sector exempt from this trend and you’ve almost definitely guessed what it is. AI startups “have grown headcount rapidly” since 2023, the report says. Additionally, data science and machine learning job postings were up 56% last year as a proportion of total postings—and up an additional 9.4% in Q1 of this year. Thorkelsson expects this demand to continue increasing, with a catch. 

There’s a difference between “true AI talent” that can build advanced systems like LLMs, and talent that’s more AI adjacent, which can help implement AI in products or services, he said. Right now, the market is conflating these two categories, leading to misunderstandings about AI talent compensation. 

“People hear about these crazy, crazy comp packages from OpenAI and Anthropic,” said Thorkelsson. “They hear about an AI engineer getting life-changing, generational money on a yearly basis…It’s really a very small segment that’s getting those things, but it’s coloring how the whole market thinks about comp for AI talent.”

He expects that over time this gap will close, and normalize. As the AI hype cycle plays out today, Thorkelsson is optimistic about how next year will play out across the talent marketplace.  

“I think there will be a pretty significant increase in hiring this year relative to last year,” he said. “Founders are going to do it in a much more careful way than they have in the past. We’re trying to give them options for that. How can you accelerate hiring while keeping your equity burn rate tenable?”

So, yeah, there’s a lot out there right now that’s kinda weird. But if Thorkelsson is right, there’s optimism ahead for the startup talent market, even if that optimism is far more disciplined than it might have been before.

See you tomorrow,

Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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Joe Abrams curated the deals section of today’s newsletter.

VENTURE DEALS

– Altana, a New York City-based supply chain management company, raised $200 million in Series C funding. Thomas Tull’s US Innovative Technology Fund led the round and was joined by March Capital, Generation Investment Management, Salesforce Ventures, existing investors, and others.

– osapiens, a Mannheim, Germany-based ESG platform and provider of compliance and sustainability reporting solutions, raised $120 million in Series B funding led by Goldman Sachs.

– Trio Mobil, a Marietta, Ga.-based developer of AI and IoT solutions for workplace safety, raised $26.5 million in funding. NewSpring Growth led the round and was joined by existing investors 212 and TIBAS Ventures.

– Intelmatix, a Riyadh, Saudi Arabia-based provider of AI-powered decision intelligence software to companies, raised $20 million in Series A funding. Shorooq Partners led the round and was joined by Saudi Venture Capital Company, Saudi Technology Ventures, Olayan Financing Company, and others.

– ZOE, a London, U.K. and Boston, Mass.-based science and nutrition company, raised $15 million in a Series B extension from Coefficient Capital.

– Rillet, a New York City-based enterprise resource planning platform designed to automate accounting, raised $8 million in seed funding led by Creandum and $5.5 million in pre-seed funding led by First Round Capital.

– Sybill, a Mountain View, Calif.-based AI assistant that supports B2B sales, raised $11 million in Series A funding. Greycroft led the round and was joined by existing investors Neotribe Ventures, Powerhouse Ventures, and Uncorrelated Ventures.

– Monto, a Tel Aviv, Israel-based AI-powered service for B2B payments, raised $9 million in seed funding. Scale Venture Partners led the round and was joined by Verissimo Ventures, F2 Venture Capital, Firsthand Alliance, and others.

– Clutch Security, a Tel Aviv, Israel-based non-human identity security platform, raised $8.5 million in seed funding. Lightspeed Venture Partners led the round and was joined by Merlin Ventures and angel investors. 

– GovWell, a New York City-based government automation platform, raised $4.5 million in seed funding. Work-Bench led the round and was joined by Bienville Capital.

– Axle, a San Francisco, Calif.-based AI company that automates workflows for compliance teams, raised $2.5 million in seed funding. Diagram Ventures led the round and was joined by Mistral Ventures, Uphonest Capital, StreamingFast, and angel investors.

PRIVATE EQUITY

– ACA Group, backed by Genstar Capital, acquired Encore Compliance, a Miami, Fla.-based developer of AI compliance software. Financial terms were not disclosed.

– MiQ, backed by Bridgepoint Advisors, agreed to acquire Pathlabs, a Missoula, Mo.-based digital media partner. Financial terms were not disclosed.

– Secur-Serv, backed by Transom Capital Group, acquired C-Net Systems, a Shelby Township, Mich.-based managed service provider. 

EXITS

– Vital Energy (NYSE: VTLE) and Northern Oil and Gas (NYSE: NOG) agreed to acquire Point Energy Partners, a Fort Worth, Texas-based acquirer and developer of oil and gas reservoirs, from Vortus Investments for a total consideration of $1.1 billion.

– Brown & Brown agreed to acquire Quintes, a Waardenburg, Netherlands-based insurance and pension broker, from Aquiline Capital Partners. Financial terms were not disclosed.

– Mollitiam Holdings agreed to acquire BluRoc, a Northampton, Mass.-based company that builds bridges, roadways, and other infrastructure, from Platinum Equity. Financial terms were not disclosed.

FUNDS + FUNDS OF FUNDS

– Amulet Capital Partners, a Greenwich, Conn.-based private equity firm, raised $1.2 billion for its third fund focused on companies in the health care sector.

– Siddhi Capital, a Philadelphia, Pa.-based equity firm, raised $135 million for its second fund focused on growth-stage companies across consumer and food tech.