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We study the participation of nascent firms in open-source communities and its implications for attracting funding. To do so, we exploit unique data on 160,065 US startups linking information from Crunchbase to firms’ GitHub accounts. Estimating a within-startup model saturated with fixed effects, we show that startups accelerate their activities on the platform in the twelve months prior to raising their first financing round. The intensity of their involvement on GitHub declines in the twelve months after. Startups intensify those activities that rely on external technology sources above and beyond the technologies they themselves control. Exploiting a shock that reduced the relative cost of internal collaborations we provide evidence that startups' decision to integrate external sources of knowledge in their production function hinges on the relative cost vis-a-vis internal collaboration. Applying machine learning to classify GitHub projects, we further unveil that the most prevalent among these external activities are related to software development, data analytics, and integration. Our results indicate that VCs and renowned investors are the most responsive to these activities.

We assess the heterogeneous impact of economic downturns on individuals’ decisions to bring high-technology ideas to the market in the form of new ventures. We thereby examine how worsening labor market conditions influence individuals’ opportunity costs of starting new ventures, the resulting composition of the entrepreneurial pool, and startup performance outcomes. Using a rich dataset of startup founders in the biotechnology and medical device sectors, we find that an increase in the unemployment rate is associated with a substantial rise in the share of entrepreneurs who are most sensitive to worsening labor market conditions. Additionally, we find that startups founded by these entrepreneurs display lower financial and innovative performance than startups founded by entrepreneurs who are relatively insensitive to business cycles. Finally, we provide suggestive evidence that individuals’ heterogeneous response to worsening labor market conditions is a relevant factor in explaining the negative relationship between unemployment and startup performance outcomes. Previously circulated as: When Push Comes to Shove: External Conditions, Opportunity Costs, and Startup Outcomes