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VC: What Is a Venture Partner?

What does it mean when someone is a Venture Partner at a VC fund?  And how are they compensated?

The role can mean a number of different things depending on the firm and perhaps is intentionally vague. Sometimes someone is a scout with the ability to write small checks without the normal decision process.  Sometimes that person is on the path to become a general partner or is ramping down from previously being a general partner.  Or there are other arrangements.

There are at least five types of venture partners compensated in one or more of five ways: 

  1. Deal-by-deal carry for sourcing work 
  2. Small piece of carry for the fund for advisory roles 
  3. Discounted economics or access to invest in a given deal or the fund as whole
  4. Payment by portfolio company in cash or equity/stock options 
  5. Base compensation (regular salary)

Types of Venture Partners:

  • Large Expert Panel
    1. A large group of people that help source new investment deals, are occasionally called on for expertise, and receive a chance to invest in certain deals. 
    2. Usually, there is no other form of compensation. 
    3. Examples
      1. MBX (fka FundRx): Venture Partners with expertise in medical and life science.
      2. NextGen Venture Partners: Utilize a large expert panel across industries to help with questions in reviewing a deal
  • Small Advisory Board
    1. Venture partners taking this role are similar to an advisory board for a startup.  They add credibility and provide advice on their area of expertise.
    2. They may help with light due diligence on a given deal, may help with sourcing or may advise the fund more generally on strategy.  In other cases they may be focused on LP relationship introductions.
    3. Often compensation takes the form of access to investment opportunities and better economics to invest in the fund.
  • Scout Writing Checks
    1. Venture Partners of this type are members of a Scout Program with a different title.
    2. Usually, they do not get paid salary or current compensation, but they receive a piece of a fund’s profits after a company has been sold (“carry”) and have the option to invest in deals themselves.
    3. They are often founders of companies or other individuals with connections in their industry that can help them source deals.
  • Onboarding Partner 
    1. An onboarding partner is on the path to become a general partner perhaps in a future fund.
    2. Generally at the partner meetings and taking part in discussions and decisions across the fund.
    3. This person is taking on increasing responsibility to see if there is a mutual fit. They may lead deals, sit on boards or perform other duties on behalf of a firm.
    4. They may or may not have a carry or receive base compensation.
  • Retiring General Partner
    1. When a general partner is preparing to retire or leave the fund, this role provides them with an offboarding ramp.
    2. They may have boards and sourcing relationships, they often are doing less LP fundraising or top-of-funnel work. 
    3. Current compensation may reduce to even zero. If the partner is a GP in many older funds, or has economics in the management company, the ongoing carry and share of management fees may be significant for years.

Contrast with other roles at private equity funds:

  • Board Partner
    1. Board partners chiefly sit on boards and help manage a funds existing portfolio 
    2. Compensation can come from the portfolio company itself in the form of stocks or options. Rarely, it is cash. 
    3. Often not expected to be involved before the decision is made to invest in a company.
  • Operations Partner From Buyout Private Equity Funds
    1. As part of portfolio management, they can perform roles as part-time consultants for portfolio companies 
    2. For example, they can act as consultants such as temporarily helping with marketing or serving as a part-time CFO
    3. Often not expected to be involved before the decision is made to invest in a company.
    4. Example:
      1. KKR Capstone: utilizes their team for a more involved approach to managing portfolio company investments  

 

by Miles Lasater with Julian Jacobs

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