Q: How much does a venture capitalist make?
It varies widely.
First, are you talking about cash or “carry” (i.e., share of the gains)? The partners in a fund generally keep 20% of all the gains — once all the fees are paid back (this can be higher at top funds). But how that carry is shared varies widely. Partners in smaller firms often share carry (gains) fairly equally relative to seniority. But carry in larger firms is rarely equal, and in very large firms “partners” often can have 1% carry or less, or sometimes, only carry in their own deals in very large firms. More on how that works here:
Here, let’s just talk about how salaries (cash) are paid out.
Second, note partners have to buy into VC funds with real $$$. The amounts vary, but the buy in often can be pretty high and sometimes exceed, on an after-tax basis, any salary the partner might make. Funds vary from 1%-5% of the capital investment coming from the partners themselves. Say a 3% GP commit (what the buy-in is called) on a $250m fund is $7.5m of after-tax dollars that the partners have to put in themselves. The latest $3b Founders Fund raise had 10% of the capital coming from the partners:
Third, generally, 2%-2.5% of the fund size each year for up to 10 years is set aside for costs and salaries. That’s what you’re dividing up among expenses (rent, travel, etc) and salaries. So roughly 20%-25% of the fund size is, over the life of the fund, set aside for costs and salaries. (I’m ignore recycling here, it doesn’t matter for the answer).
Those important points noted, then … on the cash / salary side, here are some rough yardsticks for a ‘full’ partner (likely 10 years in) before carry might make once 2–3 funds are under management:
- Pre-seed: $100k or less a year in salary. 2% of a $20m fund is only $400k a year for all expenses. Smaller funds often do 2.5%, but still, there’s only so much to go around.
- Seed Fund: $200k+ a year in salary. A $50m fund with 3 partners and 1 associate has $1m a year to split across salaries, expenses, partners and associates.
- Series A Fund: $300k-$500k a year in salary. Potentially much more once you are 3 funds in. Now, the fees start to matter. In say a $150m fund, that’s $3m a year in fees. In a $250m fund, that’s $5m a year in fees. The general partners often make $300k-$500k a year, and it can be as much as $1m year if you are ‘stacking’ multiple funds on top of each other.
- Series B+ Fund: $1m+ a year for top partners. In a $760m+ fund, that’s $15m+ a year in fees. There are enough fees here that the senior partners will make $1m+. Note though that at this size, the “buy in” also can be large. And if you are investing well, the carry should dwarf the cash over time.
You can also see from this why many VC firms now are raising new funds every 2 years (vs 3–4 years before). These fees start to “stack” on top of each other to some extent, and thus, your salary can double (along with your gains).
So yes, the later stage the firm, the less it’s like being a founder.
But you do have to deliver. It’s a hits-driven business. You are judged on how many unicorns you produce a year in VC. That’s hard to do. More on that here.
If you can’t do that, eventually, you’ll be fired or washed out.