Startups are an important catalyst for innovation and economic growth. Yet these important firms are also more sensitive to economic fluctuations than their more established counterparts. While the vulnerability of startups to economic downturns has been well documented, the reason for this vulnerability is not entirely understood.
Research: In Recessions, Employees Avoid Jobs with Startups
Job seekers’ risk aversion during downturns makes growth even harder for startups.
September 29, 2023
Illustration by Skizzomat
Summary.
Startups typically have a tougher time raising money during recessions. But that’s not the only reason they struggle during downturns, according to new research — they also have a tougher time hiring. That’s because job seekers prefer safer options and so are more likely to apply for jobs at incumbent firms. This, alongside the difficulty fundraising, makes growth even tougher for startups during recessions.