Learning to Launch

Abstract

We document that "pedigreed" entrepreneurs, those with prior work experience at large, public firms, create startups that outperform. We employ a novel instrument based on M&As to instrument for founder pedigree and estimate the causal impact of pedigree on startup performance. We estimate that having a pedigreed founding team leads to a 3.5 percent higher likelihood of raising financing, 22.4 percent more funds raised, and a 7.8 percent higher likelihood of filing a new patent within 3 years of founding. These startups are also 6 percent more likely to be acquired within 5 years of founding. This is consistent with investors viewing the founding team’s pedigree as a signal of domain knowledge, rather than general quality.