What Do VC Titles Mean?
Question: What is a “venture partner” and how do they compare to a “Partner” and / or “Managing Director?” And what exactly is a “Principal?” How are each compensated?
Our Take: Titles have widely varied meanings in the VC world. Unlike most other professions, there aren’t hard “rules” about what means what. But here goes…
– “Managing Director” / “General Partner” (MDs / GPs): In whatever VC organization you are dealing with, this is the top of the food chain. The titles mean effectively the same things, but many lawyers get nervous letting their clients use the term “General Partner” because this term equates to unlimited personal liability in the partnership paradigm. Therefore, the term “Managing Director” is used. Rest assured that all of them refer to each other as “partners” in conversation. MDs and GPs are compensated through management fees and receive direct carry in the funds. They essentially run the firm, engage in fundraising and vote on the deals the firm considers executing. Note, that some larger firms have smaller committees of MDs / GPs that wield most or all of the power.
– “Venture Partner” / “Partner” (VPs): This is generally the next step down the ladder, but not always. In most organizations, Venture Partners / Partners source new deals, sit on boards and act in the eyes of start-up companies just like MDs and GPs. In contrast, VPs may not have carry in the funds themselves, rather deal-specific carry for companies in which they are involved in. In some firms, however, they do have general fund carry. What’s most interesting is that some VPs are really MDs in training, while others are folks who just don’t want to be an MD, or are explicitly only intending to be at the VC for a finite period of time. At some firms, MDs / GPs who have “retired” (either voluntarily or involuntarily) are made VPs. In other words this position can be a position “on the way up,” “on the way down / out,” or “just hanging out for a while.” VPs can or can not make a salary off of the management fees. We’ve seen ranges from $50,000 a year on up to several hundreds of thousands of dollars. It can also be a full or part time position. You see everyone from young bucks trying to make their way up the ladder, to seasoned company executives becoming first time investors. Whatever the case, you rarely see these folks having another job (full-time operation roles at companies) while they are working for the VC firm.
– “Principal / Associates”: As with VPs, this functional responsibilities of Principals and Associates can range from “number crunching deal monkeys” to folks who source deals, sit on boards and act as junior partners. At some firms, the role of Principal immediately preceeds the role of Managing Director. Generally, they are younger folks who are learning the ropes and depending on the firm will each have their own level of autonomy and compensation. Rarely do they have a vote in deals and it’s probably about 50% of them who have direct fund carry. They are compensated through management fees, as most of them are still trying to pay off their business school loans.