TL;DR
A working paper from Harvard Business School and INSEAD finds that AI-native startups are 25% smaller, employ 13% more engineers, and have about 15% lower participation of entry-level workers and managers than their non-AI peers. Their hires skew high-level, elite-educated, Silicon Valley-based, and male, suggesting that AI is concentrating opportunities rather than democratizing them.
Startups built around AI hire fewer entry-level workers than their peers, according to a study work paper from Harvard Business School and INSEAD, first reported by Insider business information. Companies are more agile, flatter, and heavily weighted toward high-level technical talent.
Researchers Rembrand Koning and Hyunjin Kim examined Y Combinator startups from 2020 to 2024 along with a broader set of venture-backed U.S. companies. They define AI-native startups in two shifts: using AI internally to make employees more productive and incorporating it into products so customers can automate work that once required human teams.
The numbers are stark: AI-native startups are 25% smaller, employ 13% more engineers, and have about 15% less participation of both entry-level workers and managers. The proportion of senior workers is 20% higher and ratings are comparable to their non-AI peers, meaning more value created per employee.
The workers these companies hire have a particular tendency. “These workers are especially likely to be graduates of elite institutions, concentrated in Silicon Valley, and to be men,” the authors wrote.
That runs counter to the hopeful reading of the AI boom, in which young people use AI to beat their grades and vibe coding lowers the technical bar. The paper suggests that opportunities are instead being concentrated among those who already have credentials.
The authors’ deeper concern is exacerbating inequality, and they warn that if AI accelerates learning for those who use it, “differential adoption rates may translate into larger achievement gaps.” This applies to the workers of the companies and the businessmen who founded them.
Bottom step is cracking
The findings reflect what is already visible in the labor market, where AI is killing summer internships and graduate unemployment is increasing. Recent graduates now make up just 7% of new hires at top tech companies.
Big Tech is busy converting payroll into computing, with Meta and Microsoft eliminate 23,000 positions as AI spending hits records. Meanwhile, demand at the top is so high that AWS is putting $1 billion for AI engineers deployed in the future.
Even hiring itself has become an AI vs. AI arms race. For recent graduates, the machines are now located on both sides of the table.
The implication of the study is uncomfortable for anyone selling AI as a democratizing force. Technology can flatten hierarchies within companies and at the same time intensify the climb to enter them.
