For privately held companies, we know how it (generally) goes – as a company raises more capital, the total cash increases as the equity decreases on the compensation front. While the exact mix of cash and equity depends on the role and company specifics, the same pattern generally holds true for investors at venture capital firms except instead of cash and equity, it’s cash and carry.
The exact compensation mix depends on a number of factors like the total AUM, size of most recent fund and type of firm… and using the comp planning tool from the Thelander platform, we have the data so you can see the details for each role.
When looking at more junior positions, like associate and senior associates, the data is very stable – and pretty linear. Once the $3 billion AUM mark is passed, only ~7% of senior associates reported receiving carry at that level. At the same time, total cash increases by a little more than $30,000 for both titles between $2-2.9 billion and $3-4.9 billion AUM.
Key takeaway: As firms get larger, cash oftentimes replaces carry for junior level investors.
As you move up in seniority, the pattern becomes less straightforward.
MGPs, Senior Partners and Partners have a closer relationship to the success of the firm – because they have more skin in the game. For example: A MGP at a venture firm with $1 – $1.9 billion in AUM has a median of 25.00% in carry – compared to a Director/Principal (our equivalent of a VP) who has 2.00%. Big difference. Their compensation is much more closely tied to the success of the fund, and more likely than not includes committing capital for their carry.
One thing we’ve seen shift in the market, and have heard directly from clients, is that carry is becoming more closely held. Not everyone at a venture firm is getting carried interest, and firm size is a big factor along with performance of the fund.
The Bottom Line:
- Higher AUM doesn’t simply mean higher cash and less carry. It’s much more complex than that.
- The only way to know where you, or your firm stands, is by looking at market data.
You can trial the Thelander platform by filling out the compensation survey today.