Is the carry at PE or VC firms better at the top level?
Say at the principal/director level at a PE/VC shop, what's the carry like between the two? Any vast differences? I know PE is generally regarded as more lucrative, but I find that hard to believe when a VC fund can literally 50x on a single investment and the team can run with 8 figures in carry.
Its dependent on the fund size too, and PE tends to have larger fund sizes vs VC.
Dawg...if a VC made 50x on every single investment, then yes, the carry would be more (assuming fund size was the same and LP/GP structure was the same), but they don't. They make 50x on every 20th investment and the rest is flushed. Earlier-stage companies = more risk = more reward. On average, 10-year returns from 2010-2020 for VC are ~2% higher than PE, but I don't know how that compares over longer periods of time. If you assume higher returns = higher carry, then yes, VC has offered marginally more carry than PE (assuming all else is equal, which I'm not convinced of). I'm sure you can Google it. Anyways, those are percentage returns. I'm totally speculating but I would guess that PE funds on average are quite a bit more sizable than VC funds / there's more PE fund $ out there which means even if VC returned more on a % basis, on a volume basis, carry in PE higher. Either way, dumb question.
At what point do you get carry in VC? I’ve seen some partners at smaller shops that are ~30 years old?
VC has a younger demographic overall (former tech bros/failed startup kids)
Likely sr associate, principal/director/VP, (non-GP/MD) partner and GP/MD levels
You can make tons of money at both at the senior levels, such that it’s irrelevant to even compare because both make more money than you could ever want at the highest tiers.
Like everyone on here has said, VC returns aren’t even that impressive on an IRR basis (sure, some 50x, but they often take 10+ years to return a fund, companies raising more and more money so you either get diluted or keep dollar cost averaging the wrong way to keep your stake, tons of investments go to 0, etc).
I personally would actually argue that at the senior levels, probably easier to get a big piece of the pie in VC. PE guys are pretty limited in terms of deployable capital. You can only do so many deals a year, and it takes a massive junior/mid-level push to do a single deal.
I worked at a top VC firm one summer and the senior guys would dish out investments like candy. Source through network, barely any diligence, rush it through the IC. You can churn out this deal type. Sure, check sizes are smaller, but there’s a reason every VC fund is doing more growth stage deals (hint: bigger checks = more aum = more fees). So if you’re a VC, maybe you have 2 senior guys spending a billion dollar fund, whereas in PE, it’s 10 senior guys on a 4 billion fund. Assuming = returns, the VCs in that example make more money.
Look I mentioned, think it’s a stupid comparison because both make plenty, but I do think it’s probably easier to get a high carry per head in VC
If that's true, why is PE regarded more highly than VC in overall prestige and as an exit opp?
There’s more seats at big PE firms and there’s more well-known PE firms vs VC, so there’s just more people working in PE making lots of money as opposed to VC.
PE also pays more at the junior levels and has much more of the Wharton->IB @ GS -> PE types, so this forum thinks of it as more prestigious. If you hang out with tech people in SF they think VC is way more prestigious.
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