SaaStr · 2015-11-07
· 3861d
Why VC Partners Earn High Salaries While Founders Take Minimal Compensation
Jason Lemkin addresses the perceived inequity between VC partner compensation and founder salaries, arguing that VCs are specialized money managers fundamentally different from founders. He explains that large fund managers must generate massive returns to justify their compensation, with funds over $500M requiring $2B in cash returns to achieve 3x net returns.
Metrics in this report
Fund Size Threshold for Specialization
500000000$
minimum
Assets under management where VCs function as specialized money managers
Required Cash Return
2000000000$
minimum
Total capital return needed for 3x net on $500M fund
Required Gross Return Multiple
4x
minimum
To achieve 3x net returns on $500M fund
Small Fund Size Threshold
50000000-60000000$
maximum
Fund size below which partner behavior differs significantly
VC Partner Annual Compensation
500000-1000000$
range
VC partners at established firms