Track Record of Startups’ Investors Draws Potential Workers

Job seekers are more interested in working for startups funded by successful venture capitalists than for those whose investors lack positive track records, holding startup quality constant, Shai Bernstein, Kunal Mehta, Richard R. Townsend, and Ting Xu find in Do Startups Benefit from Their Investors’ Reputation? (NBER Working Paper 29847).

If a highly successful investor had a stake in a startup that was posting a job on the AngelList Talent job search platform, job seekers were 26 percent more likely to click for further information about a job, 36 percent more likely to start an application for it, and 67 percent more likely to submit their application. Prospective employees appear to care much less about whether a startup was recently funded than who it was funded by.  This investor effect was more pronounced for early stage than later stage startups.

Job seekers on the AngelList Talent website were 67 percent more likely to apply to a startup when it was represented as being funded by an investor with a record of backing successful startups.

AngelList Talent features job postings from startup companies. Job seekers can search the postings and apply through the platform. It has hosted job postings from more than 100,000 startups and attracted more than 10 million job seekers.   

The researchers conducted a randomized field experiment, from February 5 to April 7, 2020, in which AngelList attached “badges” to job postings that provided more information about the companies than job seekers usually see in search results. One badge showed whether the firm posting a job was funded by one of 23 top-tier venture firms. Another showed whether the firm had raised funding in the past six months. The venture capital firms badged as “top-tier” had previously invested in successful startups such as Airbnb, Amazon, Apple, Facebook, Flexport, Groupon, Kayak, Netflix, PayPal, Snapchat, Stripe, Twitter, Uber, Warby Parker, and Yelp.

In the experiment, each badge had a 50 percent probability of being enabled for each job seeker. Randomly chosen job seekers for whom the top investor feature was enabled saw that badge when they looked at positions posted by companies funded by one of the 23 top-level investors. For example, hovering their mouse over a top-investor badge might display “Kleiner Perkins invested in both [this startup] and Amazon.” The badge would never appear on a job posting placed by a startup that was not funded by a top-tier investor. Users without the badge feature enabled did not see information on investor quality on any job posting searched. AngelList tracked clicks for further information about a job, applications started, and applications submitted.  This experimental design allowed the researchers to compare the response of two otherwise similar job seekers who saw the same startup job, but with and without the investor information displayed.

The researchers further found that high-quality and low-quality job seekers responded similarly to the top investor badge, and that job seekers located in innovation hubs such as the San Francisco Bay Area, New York, and Boston had stronger responses than those in other cities.

—Linda Gorman