What is so prestigious about breaking into VC as an undergrad?

There are many reasons, but money is not necessarily one of them. In fact, salaries will be lower than at IB/PE-LBOs and Hedge Funds. The hours and lifestyle (and dress code) are much, much better, though. You will have a life. You will also gain exposure to disruptive and break-through technologies before they hit the market (imagine watching Google evolve from an idea in the head of two dorky engineers from Stanford to what it is today).

Eventually, though, you will either need operational experience at a start up (or perhaps marketing/engineering) and/or an MBA from HBS or Stanford; but if you can get promoted, then you are likely to get carry. That's when you start making real money.

VC is a form of PE. Maybe thats why..

Prestige is a funny thing. It can come from working at a start up in a certain industry, having your own business, working for a large company or working in a certain position (investment analyst at a hedge fund or a venture capitalist).

I think VC is prestigious since majority of the people working there essentially are working with entrepreneurs, are investing in companies that some associates at HF and large cap PE shops may not understand fully (yet).

I think it might be prestigious working as an analyst/manager at a company like Microsoft or Yahoo.

I think it would be even more prestigious working at Better Place (electric cars) than working as analyst with McKinsey or Morgan Stanley.

But thats just me. Like I said, Prestige is a funny thing.