Employers have two issues to deal with. First (and presumably most important), employers should take a hard look at current compensation plans of the top performers in the firm. Compare plans to current industry standards and discuss specific compensation expectations with the employee. If there is a gap between the employee’s expectations and the current plan, make closing that gap a priority or risk losing that team member to a more competitive firm.

Second, when courting potential new employees, there is an opportunity to differentiate the firm by offering something better, especially to newly minted MBA’s. In addition to base salary, consider more attractive variable compensation and a share in the upside through carry participation. Discuss the typical partner path and earnings targets (both short and long term), and consider anonymously sharing some compensation ranges earned by the top 10% in the previous year to demonstrate what is possible in the firm.

From the 2007 Private Equity and Venture Capital Compensation Report by Job Search Digest

Unlike our findings in the hedge fund industry, where employees in the UK earn higher compensation, the players in venture capital and private equity jobs in the US and UK are earning similar total compensations. The base salaries of professionals in the UK are 6% more than their US counterparts; the bonus package in the US, however, makes up for the 6% difference. The compensation gap widens when considering the cost of living as it currently costs 25% more to live in London than in NYC. Another interesting fact to note is that the vacation benefit in the UK is greater by 1 ½ weeks.

Professionals, both in the US and UK, claimed that they are able to strike a good balance between their personal and professional lives. More than 53% of the respondents from these two countries claimed that they are doing a better than average job of balancing their lives. About 20% in each claimed that their work/life balance was excellent. None of the respondents in the UK claimed that they were poorly balancing their work/life balance and only 3% in the US were doing a poor job of striking a balance in their lives.

From the 2007 Private Equity and Venture Capital Compensation Report by Job Search Digest

A large majority of the respondents stated that they were already partners or were on the partner track. 45% of the respondents said that they expected to become partner in only 3 years or less. 21% said that they were 7 years away or more from becoming a partner in their firm.

This is especially interesting as 21% of all respondents have less than 2 years of experience in the industry and 42% have been with their current firm for less than 2 years. Also, an overall 53% of the respondents have less than 5 years of industry experience and 79% have less than 5 years with their current firm.

From the 2007 Private Equity and Venture Capital Compensation Report by Job Search Digest

More than 54% of the respondents are entitled to 4 weeks or more of vacation time and 28% of respondents stated they get 3 weeks of vacation indicating that there is plenty of vacation time across the board. It is not clear, however, how much of this vacation time is actually taken each year.

49% of the respondents actually feel that they are doing a better than average job of achieving balance in their lives. Only a small minority of stated that they strike a poor balance between their work and personal lives. 38% of the respondents stated that the work/personal life balance is average. As a point of comparison from other studies, this data shows the work/life balance achieved here is better than that of those employed in the hedge fund industry.

From the 2007 Private Equity and Venture Capital Compensation Report by Job Search Digest

For Venture Capital jobs and Private Equity jobs, the average total cash compensation is $224,000. 41% earn $100,000 - $200,000 and 21% earn more than $300,000. Just 2% of the respondents’ cash compensation was above $1 million with an average base salary of about $685,000.

Survey respondents with a total compensation of more than $1 million received, on an average, a bonus of 45% (or about $500,000). For those earning $150,000 to $300,000 in total compensation, the bonus percentage drops to 32%.

From the 2007 Private Equity and Venture Capital Compensation Report by Job Search Digest

With regard work experience that they have, it is found that nearly half the respondents have a solid 10+ years of experience and 69% have more than 7 years of experience.

Last year, compensation increases followed solid industry performance. About 2/3 of the respondents got a hike in their compensation last year. 28% of the respondents’ salaries did not change and the remaining 5% saw a decrease in their compensation. The expectations among professionals for future performance are even higher this year as 77% of the respondents are confident about getting a raise and only 3% expect to see a decrease.

From the 2007 Private Equity and Venture Capital Compensation Report by Job Search Digest

The respondents in the survey were asked to indicate the number of investment professionals working in their organization. Reflective of the industry, 77% of the respondents indicated that they are working with firms that have less than 50 professionals and a full 89% stated their particular group is made up of less than 25 professionals. Only 14% said they work for firms greater than 100 people.

Various nations from across the globe were represented in the survey. The USA represents 67% of all the respondents. The UK was the second highest with 7%. France represented 3% of the total respondent numbers with China, Germany, Hong Kong and India representing 2% of the respondents each. All the other nations included in the survey represented the remaining 15% of the respondents. As expected, in the US California had the highest number of respondents and represents 22% of the total. California had as many as New York, Massachusetts and Illinois combined. New York comes in 2nd with 12%, Massachusetts’ respondents comprise 6% with Illinois and Connecticut comprising of 4% and 3% respectively.

From the 2007 Private Equity and Venture Capital Compensation Report by Job Search Digest

The compensation progression clearly follows the career path. On average, the compensation of associates and senior associates is less than 40% of what a managing director makes and about 65% of what a principal in the firm makes. Also the most senior team members realize 35% higher bonus percentages on average. The real money starts at the Principal level and is found to nearly double at the Managing Director level. A surprising factor is that Associates earn nearly as much as Senior Associates. This may be an indication of the high demand for talent in the market even at the lower levels or a byproduct of varying responsibilities by title between firms.

Not surprisingly, the more years of industry experience one brings, the greater likelihood he or she will participate in carry. From a title perspective, the survey found 9 out of 10 partners receive carry and 6 out of 10 of those on the partner track also stated they are receiving some level of carry today.

When examining all the responses of those who said they were dissatisfied with their compensation, many stated that lack of sharing in the upside opportunity was the main reason for their dissatisfaction with their pay packages.

From the 2007 Private Equity and Venture Capital Compensation Report by Job Search Digest

An MBA degree in Private Equity and Venture Capital jobs is pretty much a standard. Over 50% of the respondents were MBA’s (or had an international equivalent post-graduate degree) and 82% in total have an advanced degree of some sort. It turns out the pay difference, however, is not all that significant. The survey indicates that MBA’s earn a base salary 19% higher than non-MBA’s. This gap is narrowed by the difference in bonus payout, where MBA’s receive a 6% smaller bonus. The vacation benefits for both MBA’s and non-MBA’s were found to be similar.

From the 2007 Private Equity and Venture Capital Compensation Report by Job Search Digest

In 2007, Job Search Digest conducted a survey of professionals who were involved with venture capital or private equity investment firms. There were hundreds of respondents from various parts of the world. Participation from firms both large and small such as: Credit Suisse, Labrador Ventures, Intel Capital, Mayfield, New Enterprise Associates, and SoftBank Capital.

The survey results address issues such as the compensation earned by professionals and their work satisfaction. The survey also aims to understand how these professionals perceive their work and what they expect from their employers.

Some notable findings include:

• The annual average compensation for professionals in the industry is $224,000 with an average 3.5 weeks of vacation benefit.
• Nearly ½ of respondents bring at least 10 years of work experience to the table and only 5 years of private equity or venture capital experience.
• Despite solid compensation packages and an optimistic view of future pay increases, there is overwhelming dissatisfaction among most of these professionals.
• Although common in the industry, an MBA doesn’t guarantee better compensation.
• The difference between the UK and US in terms of compensation and overall work and personal life balance is negligible.
• At the lower levels, there is very little difference in cash compensation between the US East and West coasts and even the Central states. The differences become significant in the higher level positions.

Job Search Digest is preparing the 2008 survey and will again invite industry insider to participate in the most comprehensive study in the Private Equity and Venture Capital industry. The results help private equity job and venture capital job seekers better manage their career and fund managers to differentiate the benefits of working for their particular firm.