The Challenge of Compensating Top Talent –

In many ways Harry Laswell is the quintessential corporate VC alumnus. After 21 years at Intel, including five with Intel Capital, he founded American River Ventures in June, deciding he wanted to do venture capital work in an independent setting.

“I wanted to work with the entrepreneurs more and Intel is a more passive investor,” he says. “Quite frankly, this is more lucrative. We were treated very well by Intel standards, but not as compared with an independent fund.”

The compensation problem haunts corporations, because they cannot retain their most ambitious employees. Corporate VCs can easily figure out the potential carry from their investments, and in the good times at least, corporate salaries don’t compare.

Some corporates let their venture employees invest in a side fund, much to the chagrin of operations and technology staffers, who question why the venture group gets all the glory and payoff for their sweat. No matter, providing incentives based on financial performance clearly pushes the interests of the venture group away from strategic metrics.

Ideally, variable compensation based on the integration of new technologies would preserve the strategic interests, but besides stock options, how would that be measured?

Ken Bronfin, senior vice president at Hearst and head of the six-year-old venture unit, says the hiring process may provide a solution. “You either go out and find a group of really smart venture people who know how to invest and teach them the media business, or you take a bunch of really sharp media people and teach them how to invest,” he says. “We’ve found [people with] the media background work best.”

Unfortunately, many of the corporate types who get into venture are mavericks who discover they prefer VC to the corporate world. In many cases, the good ones end up like Laswell.