The entrepreneurship literature has documented a persistent wage penalty for startup employees compared to those in established firms. Separately, research on immigration often finds that immigrants earn less than native workers. This paper investigates whether these penalties compound in the context of startups. Using matched employer-employee data from Portugal, we find that the startup wage penalty is significantly attenuated for immigrants. Our analysis explores the mechanisms driving this result, providing evidence consistent with both demand-side and supply-side factors. We find that this effect is stronger for immigrants in human capital-intensive industries, and for immigrants that face mobility restrictions. These findings are consistent with immigrants receiving a compensation due to the value they provide to firms, as well as a compensation driven by increased risk associated with firm failure. This study challenges the assumption that labor market penalties are additive and highlights the complex interplay between firm characteristics and worker heterogeneity in shaping compensation within entrepreneurial ventures. The findings suggest that startups can benefit from a diverse workforce and contribute to a more inclusive entrepreneurial ecosystem.
