When it comes to private equity and venture capital careers, the size of the company you work for is a key variable in determining how much you’re likely to be paid. According to the findings of our 2013 Private Equity and VC Compensation Report, those working at large firms, defined as those with greater than $1 billion in assets under management, expected to see 81 percent more compensation on average than their small firm peers. While this number may seem shocking on the surface, this is a composite of all respondents. When we compared similar titles, the results were less dramatic, especially at the lower levels of the firm.
Base Salaries Higher in Large Firms
The first place we looked when analysing the differences in compensation by firm size was in base salaries. Here, we found that as firm size increased, base salary also increased. However, the difference was relatively small compared to bonus compensation. There was very little difference in base compensation for employees working at firms with under $200 million in assets under management and those working at firms with $200 million to $1 billion in assets under management. We did notice however a slightly more significant jump as firms crossed the $1 billion mark.
Firm Size More Relevant when it comes to Bonuses
Unlike base compensation, we found a much large disparity when it came to bonuses. Interestingly, small firms actually outperformed their mid-sized peers in 2012. This reverses the trend of the prior year where small firms were the lowest performing when it came to paying out incentive compensation. This is likely due to successful results within the private equity and venture capital industries, as small firms generally have more compensation tied directly to investor results, especially for senior leaders.
Large firms however outperform both their small and medium sized peers by a large margin. The average bonus in a large firm exceeded $250,000 in 2012, compared to an average bonus of just under $100,000 for a small firm. This is a substantial difference and it likely reflects the simple financial reality that large firms have more client dollars per employee that can be paid out in compensation.
Much of the differential in pay came at the higher levels of the organization. Analysts and associates saw marginal increases in pay as firm size increased, but certainly not as significant as senior leaders. Directors and principals saw the biggest pay differentials as firm size increased. This partially reflects the wider scope of responsibility that fund executives have in large firms.