Exclusive VC Compensation Study

Next year is shaping up as a reasonably subdued one for VC professionals when it comes to salary and bonus—at least, judging from a small survey conducted this summer.

Just one in five (21%) participants in our survey anticipates that salaries for partners/managing directors will go up in 2011. Three-quarters (76%) say they’ll stay the same, and 3% say they’ll go down. For those saying they’ll go up, the average expected increase is 8%, and the median is also 8 percent.

It’s a similar story for bonuses (for those firms with bonus programs): about one in five (22%) anticipates bonuses going up for partners/managing directors at their firms, three quarters (74%) say they’ll remain the same, and 4% expect a drop. Those saying they’ll go up expect an average boost of 12%, and a median boost of 6 percent.

The survey included 30 North American venture firms with an average of $295 million under management (median $121 million). Each has an average of six full-time investment professionals and a median of four. In other words, it is a small sample of small firms.

The outlook is better for the lower pay grades at these venture firms. Fully half of respondents, for example, expect their junior professional salaries to rise next year, while the other half expect them to stay the same. For those anticipating an increase, the average expected boost is 5% and the median is 3 percent. As for bonuses, only a quarter of respondents said they expect their junior professionals to earn higher bonuses next year (by an average of 6% and a median of 5%), while 70% said they expect them to stay the same, and 5% expect them to drop.

Half of respondents anticipate their back-office personnel will see salary increases next year (by an average of 4% and median of 3%). Meanwhile, just 15% of those with bonus programs expect their back-office personnel will see bigger bonuses next year (by an average of 7% and median of 6%), 75% expect them to hold firm, and 10% expect them to go down.

Some other findings of note:

• Seven percent of participants in our survey have an annual bonus plan for partners only, another 14% for all investment professionals only, and just over half (52%) for all employees at their firms. The rest (28%) say they don’t have an annual bonus program.

• Seven percent of participants have a co-investment program for partners only, another 13% for all investment professionals only, and the vast majority (80%) say they don’t have a co-investment program.

• At the time of the survey, one in five participants expected to add staff in 2010, and just 3% expected to reduce headcount. The rest (77%) planned to hold steady. Those that did plan to add people this year mainly planned to hire junior professionals. —David Toll, Editor-in-Charge, Deals Group

Editor’s Note: If you would like to be the first to get data like these next year by participating in the Reuters annual PE compensation study, please contact David Toll at david.toll@thomsonreuters.com.