The Sheffield firm showing why revenue per employee is key yardstick of success: David Richards

I thought of that test again on Wednesday, when Chalkie, a very smart Sheffield startup whose software writes lessons, slides and worksheets for teachers, came to talk at our Digital Forge event. They reached £5m of annual recurring revenue in the summer, 18 months after launch, with a team of ten. They are now close to £10m with 14. The climb from £1m to £5m took about four months.

Add that up. At £5m a year each of Chalkie’s ten staff members were hauling in £500,000 per head, while at £10m a year each of the 14 staff members are hauling in over £700,000 per head. I can recall my own software company doubling revenue only for the takings per head to fall as we expanded and set up a sales floor and a support team to service it. Chalkie’s have risen by more than 40 per cent.

So now I have two questions for any startup. What’s the revenue per person, and how fast is it growing? Headcount tells you nothing.

It gets even stranger with the larger players. The Swedish company Lovable in February had 146 employees to support an annualised run rate of $400m, which is one month’s revenue multiplied by 12. In contrast, the float prospectus of Anthropic, filed last month, uses a stricter yardstick, the revenue of the last twelve months, and reports more than $6.6m per employee for 5,300-odd employees, up from $1.4m per employee a year earlier.

So where’s the work gone? At Chalkie I can see some of this in action. The support desk that I’d have expected to hire is a single person, Emma O’Carroll, plus an AI agent called Fin that was created by someone else.

The maker of that software reports that 87 per cent of the support inquiries that come in are dealt with without any human intervention, and in May there were over 4,000 of them, up from 153 in December last year. As I mentioned last week, Jerilyn-bot manages my diary. Like Fin, she is on nobody’s payroll.

The same is happening at the top of large companies. Eric Schmidt, CEO of Google for many years, says he spent 12 hours a day attending meetings just to keep the company facing in the right direction.

Much of this work can now be done by software, he told Nicolai Tangen, who runs Norway’s oil fund, in a recent podcast interview.

Headcount is the wrong thing to measure. It’s the sort of test that an academy for companies with plans to list on the market should avoid, because the people who invest in such companies worked this out a long time ago.

When I was starting out, another founder would usually ask how many people were in my company, and the bigger the number the better.

Nowadays the boast is different. It’s about what each of those individuals is bringing in.

Chalkie would have got into the academy on the day it hired its tenth member, and that would be the least interesting thing about Chalkie.

David Richards MBE is managing partner of Yorkshire AI Labs