The numbers are closer than you might think, based on an analysis of statistics presented in the just-published study, 2011-2012 Holt-Thomson Reuters Private Equity and Venture Capital Compensation Report, North American edition.
Partners at the venture capital firms who participated in the study earned a median salary plus bonus of $445,000 in 2011; their counterparts at LBO/growth equity shops, by comparison, earned a fatter median salary plus bonus of $540,000. However, managing general partners at venture firms actually pulled in slightly more than their counterparts at LBO/growth equity firms in median salary plus bonus, $1.1 million to 1.0 million. Click through to see an infographic comparing compensation for these and six other common positions.
That the buyout firms in the study manage more money, on average, than the venture firms accounts for some of the difference. Salaries and bonuses are paid largely out of management fees, which in turn are based mainly on assets under management. The venture firms in the study have a median of $712 million in assets under management, less than the median of $951 million in assets under management for the LBO/growth equity firms. Buyout firms also tend to have streams of income that venture firms don’t, such as transaction fees (although limited partners over time have negotiated to keep a larger and larger percentage of these, through management fee offsets.)
By the same token, buyout firms tend to have more investment professionals than do venture firms, especially at the junior level, and therefore more wallets to fill. According to the study, for every investment professional, LBO/growth equity firms have a median of $62.9 million in assets under management, while the figure is $83.3 million for venture firms.
That would suggest venture firms gather more in salary-and-bonus-generating fees per investment professional than do LBO/growth equity firms. And indeed, venture firms in our sample generate a median of $1.29 million in fees per investment professional every year, more than the $1.10 million at LBO/growth firms. Such statistics help explain why salary and bonus compensation at venture firms in the study, though smaller by assets under management, are as close as they are to the LBO/growth equity firms.
To be sure, compensation levels depend on more than just assets under management and employee count. At individual firms factors such as location, prospects for future fund-raising, past compensation practices, the allocation of carried interest, the value of other forms of compensation provided, experience level of professionals, and other considerations also have an impact.
The 2011-2012 Holt-Thomson Reuters Private Equity and Venture Capital Compensation Report is based on a survey of more than 100 firms conducted in the spring and summer of 2011. All told they provide detailed compensation data on more than 3,000 workers, employed in more than 30 different job positions. The study is a joint effort of Thomson Reuters (publisher of peHUB) and compensation consultants Holt Private Equity Consultants and MM&K.
For editorial questions about the 2011-2012 Holt-Thomson Reuters Private Equity and Venture Capital Compensation Report contact [email protected]. For information on how to order a copy contact [email protected]