In the war for talent, startups are often outgunned. With a limited reputation, fewer resources, and lower visibility in the labor market, they often struggle to attract the attention of job seekers, especially when competing with better-known employers. These hiring challenges can directly affect startup growth.
So how do these fledgling firms get noticed?
Startups are increasingly turning to “firm-driven search” — reaching out to candidates directly instead of waiting for applications to roll in. The tactic boosts visibility. But new research from Wharton management professor Danny Kim shows that while it improves the odds of startups hiring, it also raises the chances that new hires won’t stick around.
“This approach allows startups to overcome some of the visibility and credibility barriers they face in the labor market,” Kim said. “But we found that the same mechanism that gets people in the door may also lead them to leave sooner.”
Why Recruited Employees Quit Sooner
The study is published in the Strategic Management Journal and co-authored by Michael Pergler, Wharton alum and partner at law firm Kirkland & Ellis. Drawing on data from Venture for America (VFA), a nonprofit that placed recent college graduates at startups across the country, the researchers were able to isolate whether a candidate was hired after initiating contact themselves or after a company reached out first.
They found that startups using firm-driven search were significantly more likely to hire someone. Firms that contacted four to nine candidates were nearly twice as likely to make a successful hire as those that didn’t reach out at all. The effect was strong across every stage of the hiring funnel, from initial interviews to accepted offers.
But there was a catch: Employees brought in through firm-driven search were 77% more likely to quit the startup. The same candidates who responded eagerly to proactive outreach often ended up leaving their roles sooner than their peers who had sought out the job themselves. This turnover poses a clear threat to venture scaling.
“Firm-driven hiring is a double-edged sword.”— Danny Kim
Why the mismatch? Interviews with VFA fellows offered a clue. Candidates who were contacted directly by startups often pulled back from their own job search, shifting focus to the opportunity in front of them. They felt validated by the attention, and in some cases, accepted roles they hadn’t planned to pursue. As one fellow explained, “I kind of got swayed into that direction.”
Kim noted that this dynamic has deeper implications. “When a candidate accepts a role because the company made the first move, rather than because they really wanted to work there, it can result in misaligned expectations from day one,” he said.
Despite the retention risks, many startups still rely on this approach. The study found that firms with multiple open roles, or with less reputation in the job market, were the most likely to use firm-driven search. Startups without venture funding, in particular, leaned heavily on proactive outreach to make up for their lack of visibility.
These companies know the risks, but the alternative — staying understaffed — can be worse. “For some startups, especially those under-resourced or under the radar, the benefits may outweigh the costs,” Kim said. “Getting talent in the door quickly can be a lifeline for a small team under pressure. But it also raises questions about long-term team stability.”
Employee turnover is uniquely challenging for startups, Kim added. Data show that in a given year, the rate of turnover in VC-backed startups is about 20%, compared to the national average of roughly 4%.
“The same mechanism that gets people in the door may also lead them to leave sooner.”— Danny Kim
When Startup Growth Is Worth the Risk
What should founders and hiring managers take away from this research? The study suggests that firm-driven search can be especially useful for startups that struggle to generate inbound interest. Reaching out directly improves hiring outcomes across interviews, offers, and acceptances — particularly for companies with lower visibility in the labor market. In this way, it plays a role in accelerating startup growth — even if it introduces risk.
At the same time, the research shows that hires made through this approach are more likely to leave. Because these candidates are often less familiar with the role or the company, the resulting job match may be weaker.
“We saw that candidates who responded to outreach often dialed down their own search efforts,” Kim noted. “That means they may not be comparing options as carefully, which can affect how well the job ultimately fits.”
Still, the study does not suggest abandoning firm-driven search. Rather, it highlights the trade-off: Startups may gain speed and access by initiating contact, but those benefits can come with elevated turnover.
As Kim put it: “Firm-driven hiring is a double-edged sword. It helps startups hire, but if not managed carefully, it can lead to higher churn.”
