Talent Flows in Venture Capital Networks

Abstract

Venture capital (VC) investors provide startups with financial and strategic resources, yet their role in facilitating talent acquisition remains under-explored. We examine talent flows among startups within a VC's portfolio network. Using individual career history data for 24,006 U.S. VC-backed startups (2000-2022), we document that a significant share of new hires hail from the investor's own portfolio. These talent flows are strategically timed: departures to peer startups occur primarily when the source firm exits the portfolio through failure, acquisition, or IPO. Leveraging quasi-exogenous variation from staggered changes in conflict-of-interest laws, we find that such portfolio-based hiring significantly improves startup survival, growth, and exit outcomes. Together, these findings imply that VCs help improve startup performance by facilitating the inter-temporal redeployment of human resources from retiring holdings to more active ones.

Keywords: Venture capital, Startup hiring, Human capital, Entrepreneurship, Startup labor markets, Employee mobility