Redeploying the Jockeys: Do VCs Create Internal Labor Markets For Entrepreneurs?

There is an ongoing debate on whether VCs bet on ideas or founders. Prior studies find that successful startups often have kept businesses stable but replaced founders; however, practitioners see founders as more critical. This paper aims to rationalize the two views. I analyze new hand-collected data and find that VCs redeploy founders across portfolio companies, highlighting VCs' emphasis on human capital. I propose that VCs utilize private information to reallocate talent, and I show: (1) former VC partners continue influencing founders' mobility; (2) the redeployment positively predicts VC performance; (3) the redeployment is stronger where information is more asymmetric.