Salary of Venture Capitalist

Explained Briefly

Venture capital firms primarily invest in start-up companies and profit by exiting, i.e., generally selling their investments. Venture capitalists expect that many of the companies they invest in will fail. But the hope is that at least one investment will generate huge returns and make the entire fund profitable. These significant gains in one investment can yield extremely high returns for the firm, fund managers, and analysts.

Venture capital salaries are generally higher than most Financial Analyst rolesFinancial Analyst RolesFinancial analysts analyze the financial data and other relevant information and provide valuable insights to the management for better financial decisions. In addition, they diagnose the economic conditions, company’s performance and fundamentals to forecast future performance and recommend a course of action.read more. This article looks at venture capital, its roles, and, more importantly, an in-depth analysis of venture capitalist salaries.

Now comes the main part: the remuneration or your compensation and, to be more precise, your salary as a venture capitalist associate. But, of course, we all like numbers, don’t we? Let us talk numbers…

You are free to use this image on you website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Venture Capitalist Salary (wallstreetmojo.com)

Venture capitalist earns money in three ways:-

  • Basic salaryYear-end bonus and the last one isCarry

We are sure you know what a salary and a bonus mean. However, the question you will ask here is, what is carry? Let me answer this; carry is the incentive fee charged on the profit earned. Think of this as the percentage of profit that goes to the fund managers. Normally, the concept of carrying comes into the picture once the venture capitalist has delivered the minimum hurdle rateHurdle RateThe hurdle rate in capital budgeting is the minimum acceptable rate of return (MARR) on any project or investment required by the manager or investor. It is also known as the company’s required rate of return or target rate.read more of return to the investors. After that, the profits are normally shared via Carried InterestCarried InterestCarried interest, often known as “carry,” is the portion of profit earned by a private equity firm or fund manager upon the fund’s exit from an investment. This is the most important part of the Fund manager’s total remuneration.read more.

source: payscale.com

We have brought together the figures for the remuneration of venture capital associates in two locations in the United States of America and the other one in Asia, mainly India.

Venture Capitalist Salary in U.S. 

We have rough figures given below as the compensation of a venture capitalist as per their designations, starting right from an associate to the company’s Managing Director. The compensation usually weighs more towards their carry bonus compensations. Your work hours are completely industry-specific. However, the work hours are much less than an investment banker. Usually, the venture capital firm’s senior management has a variable salary, for they carry a heavyweight age on their carry bonuses, which fluctuates with the company’s performance. Take a look at the numbers below.

  • An Analyst earns close to $80k to $150kAn Associate earns close to $130k to $250kThe Vice President gets a salary near $200k to $250k + a $0-1million carry bonusThe Principal or the Junior Managing Director draws $500k to $700k + $1 to $2 million carry bonusThe Managing Directors and the partners draw approximately $1 million + $3 to $9 million carry bonus

These numbers are rough as the remuneration varies from company to company and industry to industry. Depending on the size and the specialization of the venture capitalist firm, the salaries and the bonuses vary. A pre-MBA venture capitalist analyst or an associate can expect an annual salary of $80,000 – $150,000. If you include a bonus, you can add a certain fixed percentage which will sum your salary up to $86,000 to $250,000 and a medium of $170,000. The company also compensates the associate for sourcing a dealSourcing A DealDeal Origination is a strategy used by firms to find investment prospects, either by gaining industry knowledge or by forming a deal for themselves using their connections with the involved parties.read more or finding a deal as your level increases your bonuses with the involvement of carrying in your portfolio.

We hope the chart below will be of some help. 

source: Payscale.com

Venture capitalist Salary in India

Unfortunately, every location across the globe does not share a similar remuneration. For example, the venture capitalist associates in India do not have an income to envy. The lowest level of salaries can be too low to be a venture capitalist.

An Analyst

Thankfully, you need not be an MBA pass out from a very big or very expensive institute at this level. At campus interviews, many firms hire fresh MBA graduates for ₹10 to ₹15 lacs.

An Associate

Here, an associate’s salary is almost double that of an analyst. Hence, he may draw anywhere between ₹20 lakhs to ₹30 lakhs. At this level in India or anywhere, the associate is not eligible for carrying, which is the most tempting part of a venture capitalist’s job. And in case they are eligible, the numbers are not quite appealing.

There are very few companies that are the top brands filled with money and maybe generous with their junior staff.

The Vice President or Principal

There is a huge difference between juniors’ and seniors’ base salaries. As the grade increases, it increases the remuneration of the employees of the venture capitalist firm. It is mainly because it all depends on the size of the fund, the track record, the credentials of the Principal, and how much or how desperately the venture capitalist firm wants to retain him.

You can say that the base salary here is close to ₹30 lakhs to ₹50 lakhs. However, the base salary is easily overshadowed by a carrying bonus.

Junior MDs, MDs, and Partners

To go up to this level and take home a few crores might be a dream of every venture capitalist. However, the funds are the real performers at this level of a venture capitalist firm. All your performance and effort put into the ventures all these years will not let you regret a relatively slow start in your career.

Several people have been partners in venture capitalist firms and have decided to become independent investors and invest from their amount. At the same time, people who prefer sticking around with a huge brand name prefer raising bigger funds through their income, including huge carry.

Top Venture Capital Firms

Below is a list of notable venture capital firms:-

source: wikipedia.org

What does a Venture Capitalist Do?

Striking deals and sourcing of a venture capitalVenture CapitalVenture capital (VC) refers to a type of long-term finance extended to startups with high-growth potential to help them succeed exponentially. read more company finance are similar to that of private equity companies. However, they have a difference in the types of companies they fund. For example, a private equity firm’s finance attracts companies that have established their businesses, whether small or large. In contrast, a venture capital companyVenture Capital CompanyVenture capital jobs are provided by the venture capital firms who provide the funding to startups or businesses in their early stages that are generally risky. To get into venture capital, one should have an MBA degree and excellent communication skills.read more will only target a start-up organization. It was very important to give this difference here because this difference is the only one that defines the role of a venture capital associate.

A venture capital associate’s two main job roles are: –

Sourcing deals

  • Your job will be finding and screed deals on the front line. It is like sales; you have to find the right deal by cold calling the organizations and entrepreneurs and fixing up meetings.After the agreement is understood and its screening is done, the prospect deal is presented to the firm’s partners.

Plays the role of existing deal support

  • Like any other finance analyst, the position of a venture capital associate is to support the deal in every aspect, right from due diligence to modeling the deal and executing the same.Due diligence is a part where the analyst produces a report that may lead the firm to either accept or reject the proposal.The venture capital associate works very closely to monitor how close the venture capitalist firm is to closing the deal.Unlike other associates in the finance industry, a venture capitalist associate works for very long hours in closing the deal.However, with the added efforts comes very good compensation for a venture capitalist associate.

Job profile of Venture Capital Associate

A venture capital associate can work under the following designations: –

An Analyst – A venture capitalist analyst looks for deals, prepares the financial model, conducts the financial analysis, or screens them before presenting them to the venture capitalist firm.

An Associate – An associate makes sure he closely monitors the deal from the start until the end and manages it by himself.

Where analysts and associates are juniors, they are followed by senior managers who are the principles and partners of the venture capitalist firm who execute the deals and give a green signal to funding the venture.

Conclusion

We hope this article has been of good help to you. We have tried our best to serve your motive of giving you information about venture capital and its remuneration. A reasonable description of venture capital gives you an idea about the study topics that you will be considering in your next few years, along with what remuneration you can expect for yourself at what level and in which part of the globe.

Like we said earlier, it is very important for you to know the course details before you register for one. And we have tried our best to give you the required information.

  • How to get Venture Capital?Top 10 Venture Capital BooksAngel Investment vs. Venture CapitalPrivate Equity in Canada