Early Joiners and Startup Performance

Finance and Economics Discussion Series(2023)

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Abstract
We show that early joiners---non-founder employees in the first year of a startup---play a critical role in explaining firm performance. We use administrative employee-employer matched data on all US startups and utilize the premature death of workers as a natural experiment exogenously separating talent from young firms. We find that losing an early joiner has a large negative effect on firm size that persists for at least ten years. When compared to that of a founder, losing an early joiner has a smaller effect on firm death but intensive margin effects on firm size are similar in magnitude. We also find that early joiners become relatively more important with the age of the firm. In contrast, losing a later joiner yields only a small and temporary decline in firm performance. We provide evidence that is consistent with the idea that organization capital, an important driver of startup success, is embodied in early joiners.
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Key words
early joiners,startup performance
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