Human Capital and Startup Financing with Bernardus Van Doornik
We establish the relevance of human capital to startup financing. Using administrative databases from the Central Bank of Brazil, we obtain information on private firms, their founders and their access to bank credit. Our empirical strategy is based on the premature death of founders, which allows us to identify how losing founders’ human capital affects startup financing. The results show that once a founder dies unexpectedly, there is a decrease in the amount of credit and an increase in interest rates and default rates. These findings are mainly driven by the death of founders who are also managers in the firm, which is consistent with the theory of founders contributing critical resources to their firms.
Startup Compensation and Team Stability with Tong Liu
It is of uttermost importance for startups to have a stable team, in particular during downturns. This paper studies compensation structure within startups and how it affects the stability of their teams. Using a Brazilian database on private firms and exogenous changes of exchange rate between Brazil and its main exporting destinations as a quasi natural experiment, we observe that during downturns founders reduce their own wages while compensation of employees does not change. This pattern is associated with a lower probability of worker leaving or being fired. Our evidence uncovers a new channel through which startups adjust labor compensation structure to provide insurance to their workers guaranteeing team stability.
