I am a current MBA student interested in venture capital and have recognized corporate VC as a possible avenue. However, I wanted to know what are the exit opportunities if any for corporate venture capital professionals? Is corporate VC a better option than working at a traditional VC firm?
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Corporate VC is different than traditional VCs in a few ways. The biggest difference is that corporate VC firms don't have carry for their investment members like traditional VC firms, which is a huge drawback. If you talk to very successful VCs, the vast majority of their wealth comes from carry from home run investments (base salary and bonus is typically much smaller than PE).
In addition to what's said above, many corporate VCs have a narrow investment focus where the investment thesis must include some form of benefit to the corporate. Although they don't have to fundraise (which is nice), corporate VCs are at the mercy of the parent company and since having a VC arm is the ultimate luxury, it's easy to close down and the parent company hits a rough patch. And corporate VC tend to be more passive so unless it's Google Ventures, Traditional VC >>>> Corporate VC.
^great point.
It's not a better option by most standards.
As others have mentioned, the plus-side is that you never have to fundraise. You have no LPs, or more accurately, you have one LP, a corporate parent. This won't affect you at the junior level too much, but at the senior level it means you never have the headache of courting investors. Fundraising is the most brutal aspect of the investment management business. That being said, it can be incredibly rewarding. Very smart people with a lot of money (sometimes even of their own, read: family offices) will take a meeting with you to listen to your ideas. It can be a spirited exchange, and the pleasure of someone demonstrating their belief in you and your story by means of an LP commitment to your fund is hard to capture in words.
Some downsides are compensation, reputation, and focus.
Compensation in investment management really comes through in carry. You want a slice of the pie; eat what you kill. If you're at a CVC, you're not usually getting carry. Some of the most senior guys may get a few points on their deals, but that's very rare from what I've seen. It's really a salary game; the MDs (some may be called 'partner') are there for the risk-free low seven-figure salary. The guys below are clocking a relatively nondescript six-figure check like any prestigious corporate job would provide. On the flip side, the guys at the top of the pyramid in VC are printing money when they have exits. Benchmark's five partners are equally splitting their 30 points of carry on every exit. eBay, Instagram, Zillow, Uber, Twitter, OpenTable, Snapchat, Yelp, Dropbox ... every single deal (yes, some are still unrealized) puts 6 points in their pockets. You want that; the salary is irrelevant.
Reputation matters tremendously in the industry. Someone who worked at Sequoia or Accel and wants to move to another fund will have an easier time than someone who worked at Highland or Shasta. It's that nitpicky. Realize then the gap that exists between the elite VC funds and the corporates. Only a distinct handful of CVCs that escape this: Google, Intel, and as of late, Sapphire Ventures (the spin-out from SAP).
Focus at CVCs is narrower and restricted to businesses that are strategic to the parent company's products or mission. i.e. Time Warner Investments is only focused on media startups. Astellas is only looking at biotech, and even then only a specific thin slice of the space that's related to the drugs the company produces. This can be one of two things to you. It could be limiting, in the sense that your dealflow and network gets incredibly siloed. Conversely, it could be empowering if you develop a sector expertise. Regardless of which it may be, it invariably makes your experience less portable. You're either the guy who does X and only X and is stuck at some CVC, or you're the guy who does X and only X and manages to move to a traditional VC fund as a Principal or Partner to specialize in X and primarily X.
In short, I wouldn't be excited about a role in CVC. The pay is fixed (with a low ceiling), the focus can be stifling if you're someone who likes seeing a lot of things, and the lack of sterling preftige can make it harder to move around the industry.
I appreciate the information that you shared and it has helped me to make up my mind regarding CVC as a career option.
Solid post. What about in terms of Pre-MBA roles where it's the traditional 2-3 year program and then either another fund or business school? Are they at a disadvantage for Post-MBA roles at traditional VCs? Also how's their comp look compared to traditional VC associates?
Comp (on average) is similar to lower. Again, corporates look at you as a line item expense. You are a cog in a big machine, whereas at a fund you're an active member of a lean investment staff. That being said, I have seen some comp packages that were way above market. A post-MBA role paying $300 base with great benefits. A pre-MBA role paying $220 base. Those were at super giant F100s and aren't indicative of what I've seen to be the norm in CVC.
not brutxx butrewa
The company I work for has both types of funding: corporate venture capital and traditional venture capital.
The biggest difference is the spirit of the both. Corporate venture capital invests with a direct interest. It seems that our corporate partner not only invest but also uses our services, which is cool, but ultimately we are a scalable tool for them. Whereas the traditional VC's look at the big picture, they want us to become an unicorn, literally a multi-billion dollar company and household name.
Just seems like they both have different priorities which could impact what you think you'll be doing at the company. If you want to be hunting the next big thing its probably better to go traditional VC (especially because partners make most of their huge dollars in carry) but if you're just interested in active investing in scalable and innovative companies then maybe corporate VC would be a better option.
Talk to a couple guys out in the field. It'll be easier than you think to set up a quick phone call or coffee meeting as long as active deals are running through their office.
Lots of good info above. I'll add one thing -- learning.
I personally believe you will become a much better investor at most traditional VC firms. There are a lot of nuances to sourcing, negotiation and pricing a deal that you do not see at a corporate VC. Very few will lead new rounds and prefer to participate instead (not all but many). I've seen guys who have left corporates to join traditional funds struggle. Lots of people could debate this but I'm just saying what I absolutely saw.
How did they struggle?
You're 35-40 years old, you have been at a corporate funds for a while. In deals you've largely followed other funds and lead/priced very few deals if any. You decide to take the reputation and network you have built and move to a well regarded VC. You have a nice title, etc. However the fact of the matter is you are an unproven junior partner where all of your peers don't trust your underwriting skills and you spend 2-3 years having a managing partner babysit all your deals and you have no actual clout. When you try to win deals, CEOs know you're not the final decision maker and your term sheets are questionable unless delivered with your bosses signature. I watched this happen to a prominent guy I like a lot. However my firm also used his situationit to beat him out in two processes. He moved to that firm from a Fortune 100 corp.
Seems like the issues arise moreso at the higher levels than at the analyst/associate level. Is it a safe assumption that someone looking to jump to a traditional firm either post-MBA or after a 2 year stint at a CVC would be regarded relatively the same as someone trying to jump from traditional vc?
No, they wouldn't, for all the same reasons I outlined above.
No, it's still similar. If you don't get experience doing traditional VC deals structures and you don't have experience sourcing without a large strategic angle, most VCs won't hire you. Have a friend trying to do this right now and he can only get interviews with VC's in tier 2/3 cities.
What is the compensation for a pre-mba associate at a corporate CVC? Would a $175k all-in offer be market?
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