Study: AI-native firms are smaller, flatter, and more engineer-heavy
9 reported
A new study by researchers Hyunjin Kim and Rembrand Koning examines how firms built around AI capabilities, termed “AI-native” firms, are organized. The study draws on data from Y Combinator batches W20-F24 and U.S. venture-backed startups whose first financing closed between 2020 and 2024. The researchers classified each firm’s AI-native status and linked it to workforce microdata on team size, function, seniority, and hierarchy. Relative to non-AI startups in the same industry-cohort, AI-native firms are 25% smaller, have a 13% greater share of engineers, and have roughly 15% lower shares of entry-level workers and managers. Their hierarchies are half a seniority level flatter, yet valuations are comparable, implying more value created per employee. The researchers argue these patterns reflect two channels: a process channel, in which AI changes how people work inside the firm, and a product channel, in which AI capabilities are built into what the firm sells. Using text from product descriptions and job postings, they found that embedding AI into the product is a primary way startups are scaling “knowledge work” without large teams of knowledge workers.
What’s reported
The study was conducted by Hyunjin Kim (Insead) and Rembrand Koning (HBS).
Data came from Y Combinator batches W20-F24 and U.S. venture-backed startups with first financing between 2020 and 2024.
AI-native firms are 25% smaller than non-AI startups in the same industry-cohort.
Their share of engineers is 13% greater.
Shares of entry-level workers and managers are each roughly 15% lower.
Their hierarchies are half a seniority level flatter.
Valuations are comparable, implying more value created per employee.
Two channels are identified: a process channel and a product channel.
Embedding AI into the product is a primary way startups scale “knowledge work” without large teams.
Key figures
Hyunjin Kim (researcher, Insead)
Rembrand Koning (researcher, HBS)
Luis Garicano (mentioned as source of tweet storm on the paper)
Sources: marginalrevolution.com
