Venture firms may be slashing management fees and producing lower returns, but the compensation for general partners and other venture investors hasn’t taken a dive.
So says the recently published study of 2002 salaries conducted by Thomson Venture Economics (publisher of VCJ) and Glocap Search LLC, a New York-based executive recruitment firm specializing in private equity industry placements.
The report, which is largely based on starting salaries of individuals placed by Glocap, tracks compensation for about 2,100 professionals at 829 firms for the years 2000 to 2002. It found that the average base salary for a general partner in a venture capital firm was $448,000 this year, down 8% from $489,019 in 2001 (see table below).
Salaries for principals declined 3.3% to $203,625 from $210,650, while base pay for chief financial officers and chief operating officers declined 6.6% to $143,429 in 2002 from $153,667 in 2001.
On the upside, venture capital analysts saw their average salary climb 3% to $67,047 this year from $65,072 the previous year. One possible reason for this bump is that some business school grads are now being forced to accept analyst gigs that used to be the exclusive domain of pre-MBAs.
Compensation for private equity professionals as a whole stayed flat (rising 0.1% from 2001 to 2002). Analysts and associates at buyout and mezzanine firms took home the biggest increases.
“I don’t think that either the fee cuts or fund cuts have caught up with compensation yet,” says Adam Zoia, founder and senior managing partner of Glocap. “That may come next year, although we’re already seeing a leveling off of salaries, whereas it had been going up for the past few years.”
Total 2002 compensation data are not available in the published report because bonuses have not yet been distributed. But it’s a safe bet that total compensation levels this time around won’t rise 32% like they did from 2000 to 2001.
“I’ve heard people say that your bonus this year is that you still have a job,” jokes Joe Logan, managing director of Pinnacle Executive Search.
Per usual, the compensation study found that buyout and mezzanine investors did better than their venture peers, although larger firms did not necessarily pay better than smaller firms. No correlation was found between a firm’s industry focus and its starting salary levels.
The study does not address numbers of new hires, but Zoia says he has seen a net increase in hiring among firms that are still in business due to increased workloads.
“It takes a lot more man hours to get a deal done because you need to do more extensive due diligence, including more trips to visit the company, more checking with customers, et cetera,” Zoia says. “For some firms, that means they need more people, especially in junior positions.”
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