Venture Capital Salary versus BB and Private Equity

Nabil725's picture
Rank: Chimp | 15

Hi everyone. I wanted to get some candid advice from all of you about a job I'm thinking about taking. It is a VC role at a top-tier firm. I'm being directly hired as an associate (so I'll skip the two-year analyst role). My only concern is that I believe that the salary is slightly low. I'll basically be making a little less than 100K on an annual basis. I know that this is a unique opportunity but I have a number of banking offers that would allow me to make your typical BB type salary. However, I strongly want to be in VC long-term. This VC role would clearly set me up to be a partner well before I'm 30. So should I really not be emphasizing salary right now given that I can make quite a lot in a few years?

I don't have much time before these offers explode so any help at all would be much appreciated.

VC analyst salary compared to Investment Banking and PE Salaries

Our users generally feel that if VC is your end game, you should focus on that rather than chasing a higher salary in the short term at PE or IB.

However, some users cautioned against firms claiming that you will make partner before 30 while also offering what you consider to be a low salary. This can be a method to lure people to work for less than they should.

You can learn more about venture capital with the below video.

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Comments (26)

Dec 15, 2017

I don't know much about salary - so sorry, but if you want to be in VC long-term and this sets you up to be a partner before 30 it seems like a smart move, and either way if you move into VC from banking later you'd be on potentially the same partner salary as you will be should you work up to it from taking the offer now. Plus skipping the analyst roles is probably a bonus in itself.

Dec 15, 2017

Don't focus much on comp. The best firms' entry level roles pay less (unless you're in MF PE).

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."

Dec 16, 2017

Thank you so much! I ended up taking the offer. You guys are right I shouldn't focus too much on comp right now.

Dec 16, 2017

You've already taken the role, so this is probably a moot point, but I'd make sure you a get a good idea of your trajectory at the firm.

It is very rare, especially at large VC shops, for anyone to be able to make it from Associate to Partner. I'd say its ever harder to make that leap in VC than it is to do the same thing from a traditional Megafund PE as more of the skillset is based on sourcing, relationship building and the right background(which usually means successful founder)

Unless you've already had a successful exit or are extremely well networked in whatever location you're working in, making it to partner from an Associate role is tough.

Brand name VC will never hurt you, but I'd make sure to figure out quickly if you actually have a chance to stay at the firm for 10+ years or if they're just saying "well with good performance you might be able to move up"

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Dec 16, 2017

There are a number of venture firms (like NEA) that will promote analysts all the way up to partner, assuming good performance. NEA is particularly notable for its rapid promotion trajectory.

To note - the vast majority of VC and growth equity firms will pay below banking and private equity at ALL levels until general partnership. This largely includes all top-tier firms, with a few exceptions for growth firms that have AUMs and teams comparable to private equity or hedge funds. If you want to optimize for total compensation, venture is not the right field for you.

    • 2
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Sep 13, 2018
7xEBITDA:

There are a number of venture firms (like NEA) that will promote analysts all the way up to partner, assuming good performance. NEA is particularly notable for its rapid promotion trajectory.

To note - the vast majority of VC and growth equity firms will pay below banking and private equity at ALL levels until general partnership. This largely includes all top-tier firms, with a few exceptions for growth firms that have AUMs and teams comparable to private equity or hedge funds. If you want to optimize for total compensation, venture is not the right field for you.

Yes, but VC seems to me more interesting.
You get to look at interesting tech companies, and do interesting deals.
Wouldn't that be fair to say?

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Dec 18, 2017

Base of 100k is alright for pre-mba associates for VCs.

Why are they hiring you directly at associate level?

Sep 13, 2018
PrivateMarketplace:

Base of 100k is alright for pre-mba associates for VCs.

Why are they hiring you directly at associate level?

That actually seems excellent to me.
As a post-MBA in ibanking and then PE it was years before I cracked $100k

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Dec 19, 2017

I would've taken BB banking. Everyone sells you on moving up (especially with a low salary), but I doubt they put the thought in your head that you would make partner before 30. Lol.

Dec 19, 2017

If you want to do VC, and you have an offer at a top tier VC, take it. Salary right out of school is essentially meaningless as long as you can pay your bills.

Dec 19, 2017

Personally I hate vc right now. I mean it's sexy and the ideal place to be but the deal quality looks awful to me. Instead of putting 50 million into fb ten years ago the competition is now forcing firms to put 100-500 million with some founder cash out into marginal firms with 20 competitors. Especially anything remotely connected to "platform potential". Returns are going to be awful in vc and though you get a nice 2% carry the ability to generate the longer term 20% performance fees seem impaired.

Personal opinion i would take the banking job just because vc seems saturated now.

Good luck. I would really look outside the box as a lotion investments now look really challenged.

Array
    • 1
Dec 19, 2017

You forgot to add "blockchain" and "AI"

That adds 20% to your pre-money instantly.

traderlife:

Personally I hate vc right now. I mean it's sexy and the ideal place to be but the deal quality looks awful to me. Instead of putting 50 million into fb ten years ago the competition is now forcing firms to put 100-500 million with some founder cash out into marginal firms with 20 competitors. Especially anything remotely connected to "platform potential". Returns are going to be awful in vc and though you get a nice 2% carry the ability to generate the longer term 20% performance fees seem impaired.

Personal opinion i would take the banking job just because vc seems saturated now.

Good luck. I would really look outside the box as a lotion investments now look really challenged.

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Best Response
Dec 16, 2017

I'd agree that there is too much money in venture right now, but it'd be rash to dismiss joining a top-tier VC as a bad career opportunity. A few observations:

  • Top-tier VCs will continue to see the best deals. While there is a lot of capital flowing around, the top funds (Sequoia, Benchmark, a16z, Greylock) still manage funds that are "small" enough to generate great returns (context: IVP has generated 40+% IRR for 36 years now. Sequoia's and Benchmark's funds are rumored to regularly return 40+% IRR also. a16z was noted to be "underperforming" other top VCs but still has 20+% IRR, and it's too early to tell). Venture returns are driven almost exclusively by outsized returns on outliers, and the companies that are getting these home run exits largely have their pick of who to raise capital from. This means they're always going to be raising from top-tier funds, and top-tier funds will always have access to the best deal flow. This won't change. The main concern is with the mediocre funds who don't have the pedigree to chase great deals, so they chase companies high up on the hype cycle that may not have great products. This will likely lead to subpar returns. But this isn't new - we've been seeing this consistently for a very long time now.
  • It's kind of a misconception that VCs can choose the best investments, and not the other way around. Top-tier VCs get top-tier returns largely because they see better deals, not because they choose better companies.
  • There are reasons platforms are backed by so much capital. 1) It's very expensive to build out, and 2) the platforms getting a ton of funding are largely winner-take-all (due to network effects) with few exceptions, and therefore a platform in a large market will be able to generate outsized returns as well.
  • Softbank is a new development that has changed the entire landscape of venture. The firm's investment thesis appears to be 1) find a category you like, 2) find the category leader, and 3) give that leader enough capital so that they will never need to raise ever again, and use that capital to complete crush the competition. We'll see if it works. Interestingly, Softbank also provides essentially an alternative to IPOs - it can theoretically provide even unicorns with more than enough liquidity to remain private forever.

Yes, blockchain and AI are high up on the hype cycle, but they're there for a reason. Both technologies have the ability to fundamentally change the way the world operates. And most companies in both spaces will fail, but the few who succeed will likely be backed by top-tier VCs, and so those funds will be able to achieve top-tier returns.

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Dec 19, 2017

FWIW i saw some data that those IRR of return were a bit bogus. But I forget where I saw it. I think overall the returns will fall.

I look in chicago the things being funded and they are getting a ton of money with mediocre founders/business models. I mean outcome health got funded at 5 billiion with 200 million cash out. And that was goldman and google. The founders best friend has a different company that got like 100 million or so in funding and has 20 competitors. Even in SV you see juicero type deals being funded.

10 years ago you could find good deals. 4 years ago reasonable. Everything I see now looks like top of y2k ipo market funding levels.

Array
Sep 13, 2018
traderlife:

Personally I hate vc right now. I mean it's sexy and the ideal place to be but the deal quality looks awful to me. Instead of putting 50 million into fb ten years ago the competition is now forcing firms to put 100-500 million with some founder cash out into marginal firms with 20 competitors. Especially anything remotely connected to "platform potential". Returns are going to be awful in vc and though you get a nice 2% carry the ability to generate the longer term 20% performance fees seem impaired.

Personal opinion i would take the banking job just because vc seems saturated now.

Good luck. I would really look outside the box as a lotion investments now look really challenged.

yeah, but the job function seems very interesting, wouldn't you say?

    • 1
Dec 19, 2017

Disruption examples are 2 out of 3 I've challenged on economics (naked capitalism has a good Alt-opinion series but I'm no expert on Uber....

It's nye I can't fully comment.

Facebook raised a couple hundred millions in other rounds ?....Uber is at 10+ billion plus so fits my narrative of much more expensI've investments ignoring my concerns on business model.

Apple....was a public company?....essentially were close to bankrupt and had to reinvent on failing cash flow so close to start up situation. They raised one round from Microsoft. I don't remember a second raise.

Array
Sep 13, 2018
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