Most start-ups are usually founded by close friends who hire more close friends and so on... So one can hardly avoid nepotism in start-up sphere, at least this is my experience.
I'm not sure if that's nepotism though. When I think nepotism I think of people getting hired purely because of their relationship to the boss. If I was doing a startup I'd be hiring people I knew could do a great job because I'd done good work with them in the past.
