Does venture capital pay more than private equity?
Venture capital tends to pay higher salaries, as their focus is on early-stage companies with high growth potential. Private equity, on the other hand, typically offers lower base salaries but can provide significant bonuses and carry fees based on the success of their investments.
Another key difference between the two is venture capital “typically involves higher risk but offers the potential for substantial returns,” says Zhao. In comparison, private equity “usually involves lower risk compared to VC investments but may offer more modest returns.”
Venture Capital Associate Salary and Bonus Levels
At the large VC firms, Pre-MBA Associates earn $150K to $200K USD in base salary + bonus, while Post-MBA Senior Associates might earn closer to $200K to $250K. If you're at a smaller/newer firm or outside major financial centers, expect lower compensation.
Private equity investors tend to invest in older, more established companies that have the potential to increase profitability with the help of investors. On the other hand, venture capitalists tend to invest in young, growing startups with unproven, yet promising, value.
Transitioning from venture capital to private equity requires a significant shift in mindset and skillset. To be successful in private equity, you'll need to develop a deep understanding of how to evaluate established companies, perform due diligence, and manage risk.
- Approaching a venture capitalist can be tedious.
- Venture capitalists usually take a long time to make a decision.
- Finding investors can distract a business owner from their business.
- The founder's ownership stake is reduced.
- Extensive due diligence is required.
- The company is expected to grow rapidly.
Venture capital provides funding to new businesses that do not have enough cash flow to take on debts. This arrangement can be mutually beneficial because businesses get the capital they need to bootstrap their operations, and investors gain equity in promising companies.
Position Title | Typical Age Range | Base Salary + Bonus (USD) |
---|---|---|
Associate | 24-28 | $150-$300K |
Senior Associate | 26-32 | $250-$400K |
Vice President (VP) | 30-35 | $350-$500K |
Director or Principal | 33-39 | $500-$800K |
Annual Salary | Monthly Pay | |
---|---|---|
Top Earners | $244,500 | $20,375 |
75th Percentile | $190,000 | $15,833 |
Average | $157,532 | $13,127 |
25th Percentile | $115,000 | $9,583 |
How hard is it to get a job in venture capital?
Many try, and many fail. It can take over a year to find a VC job, even if you have good banking experience, says the ex-Goldman associate.
In general, VC associates can expect an annual salary of $60,000 to $133,000. 1 With a bonus, which is typically a percentage of salary, the overall compensation can be much higher. In addition, firms will compensate associates for sourcing or finding deals.
The sharks are venture capitalists, meaning they are "self-made" millionaires and billionaires seeking lucrative business investment opportunities. While they are paid cast members of the show, they do rely on their own wealth in order to invest in the entrepreneurs' products and services.
Private equity is a core pillar of BlackRock's alternatives platform. BlackRock's Private Equity teams manage USD$41.9 billion in capital commitments across direct, primary, secondary and co-investments.
US Venture Capital has beaten the S&P 500's IRR by 19% over the last 25 years. Yet returns among VC investors vary wildly, because of the wrong approach. Here's how to build a startup portfolio that gives you consistent and stable returns: 1.
Carry is typically paid out after the limited partners (LPs) — the people who put money into VC funds — have received a return on their investment. This is usually 1x their original investment increased by a hurdle rate, which is the minimum rate of return required on a project or investment, which can vary.
It is a challenging career path, but it can also be one of the most rewarding, both financially and intellectually. So, if you are passionate about entrepreneurship, innovation, and investing, a career in venture capital might be just the right fit for you.
Salary + Bonus and Carry: Total compensation is likely in the $500K to $2 million range, depending on firm size, performance, and other factors. Carry could potentially multiply that compensation, or it could result in a total of $0 depending on the year and the firm's performance.
If you're successful, you will build a reputation. This, in turn, will lead to better and higher-profile deals. From there, you can get a job at a venture capital firm, where you might earn a salary of $1 million per year.
Carry: Venture partners are typically given a carry on the profits of the VC fund. This means that they receive a percentage of the profits that the fund generates from its investments. The carry percentage typically ranges from 5% to 20%, depending on the experience and seniority of the venture partner.
Is venture capital riskier than private equity?
VC tends to be the riskier of the two, given the stage of investment; however, either type of investment could go awry in certain scenarios. At the same time, VC investments tend to be smaller than private equity investments, so fewer dollars may be at stake.
There are two main risks when it comes to taking on venture capital: 1) The risk of not getting the investment; and 2) The risk of not being able to pay back the investment. The first risk is that your startup won't be able to raise the money it needs from investors.
They expect a return of between 25% and 35% per year over the lifetime of the investment. Because these investments represent such a tiny part of the institutional investors' portfolios, venture capitalists have a lot of latitude.
Venture capitalists make money from the carried interest of their investments, as well as management fees. Most VC firms collect about 20% of the profits from the private equity fund, while the rest goes to their limited partners. General partners may also collect an additional 2% fee.
Venture capitalists make money in two ways. The first is a management fee for managing the firm's capital. The second is carried interest on the fund's return on investment, generally referred to as the “carry.” Management fees.
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