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Holt-MM&K-Buyouts InsiderPE/VC Compensation ReportCurrent Trends in Design and Levels ofCompensation in the Private Equityand Venture Capital Industry2018-2019Preview
Table of ContentsSurvey BackgroundI. Introduction/Participant SummaryKey FindingsScope and MethodologyAbout the Authors12813II. Financial and Operational DataCommitted Capital and Cost of InvestmentsNumber of Funds Managed and Number of Portfolio CompaniesOwnership StructureManagement Fees/Other Fees/Fee Ratios/Fee Splits1516171819III. Human CapitalNumber of Employees per Employee GroupStaffing Changes 2017/2018Investment Manager Ratios (Capital/Fees/Portfolio Companies)Human Capital Policies/Years to Partner/ MBA Hiring & CompensationPayroll Cost and Total Employees232425272829IV. Compensation StrategyTypes of CompensationSalary & Bonus ChangesAnnual Bonus PlansCarried Interest PlansEmployee BenefitsGeneral Partner Commitment (GPC)Co-Investment Plans3132343840505355V. Year to Year Changes in Compensation LevelsGeographic Differences57jweitemeyer@buyoutsinsider.comVI. Compensation Levels Per Position (By Type & Size of VII. Compensation Levels by Type & Size of Firm – North America,Canada, Asia Pacific, & Employee Benefit Costs127 2018 by Holt Private Equity Consultants, MM&K Ltd. and Buyouts Insider. All Rights ReservedThe 2018-2019 Holt-MM&K-Buyouts InsiderPrivate Equity and Venture CapitalCompensation Report is a joint effort of threeparties. They are compensation consultants HoltPrivate Equity Consultants and MM&K; andglobal private equity publisher Buyouts Insider.It is jointly written by Michael Holt, David M.Toll and Joseph Weitemeyer.Copyright InformationData and information in this report is copyrighted bythe authors. Electronic and printed copies of thisreport can only be shared with employees of the firmpurchasing the report. Users are forbidden toreproduce, republish, redistribute, or resell anymaterials from this report to any party who is notemployed at the organization purchasing the report ineither machine-readable form or any other formwithout permission of the authors. No part of thisreport may be copied, photocopied, duplicated orforwarded in any form or by any means without thepublisher’s written consent. Failure to abide by thiswill be considered an abuse of Federal Copyright Law(17 USC 101 et seq.) and may be subject to criminalpenalties and liability for substantial monetarydamages.For permissions and other copyright-related questions,please email your question to:Private Equity and Venture Capital – North America Report Page 1
Scope and MethodologyPART 2. Sections II - IV: Strategy and DesignPART 2. Sections II - IV are the qualitative or "How" sections of the report. We collected and analyzed data concerning financial and operations information; humancapital practices; and the design of compensation plans including salary, bonus/incentive plans, carried interest plans, co-investment plans, general partnercommitment and employee benefits. Although this is 2018 information, we believe it can be helpful in planning for 2019.PART 2. Sections II - IV Firm Classifications:We classify firms by type and by committed capital to all active funds.Altogether we created 23 sample groups to complement our discussion offirm-wide compensation issues (Sections II-IV of report). The smaller samples(ie. Large VC or small/mid-size VC) correspond to your peer groups; thelarger samples (ie. All Firms) showcase broader industry trends. LBO/VC/Mezz: Combines LBO / Growth Equity / VC, and Mezzanine firms intoone “Catch-All” category with a standard 20% carried interest§§§§§§§§ Large: firms with 1.5 Billion plus in committed capital (all active funds) Small/Mid-Size: firms with less than 1.5 Billion in committed capital (allactive funds) All FirmsLBO / Growth Equity – same as LBO/VC/Mezz:Venture Capital – same as LBO/VC/Mezz:Mezzanine Large: firms with 1.0 Billion plus Small/Mid-Size: firms with less than 1.0 Billion All FirmsFund of Funds Large: firms with 3.0 Billion plus Small/Midsize firms with less than 3.0 Billion All firmsCo-Invest/Secondary – same as LBO/VC/MezzCorp Venturing//Real Estate/Debt(Catch all - All firms)Institutional – same as LBO/VC/MezzAll Firms (includes all investment types as described above) 2018 by Holt Private Equity Consultants, MM&K Ltd. and Buyouts Insider. All Rights ReservedSample CharacteristicsThe table below shows you the number of firms populating each of the 16sample groups used in Sections II-IV of this report covering firm-widecompensation practices. You can also see the make-up of each sample interms of assets under management (committed capital, all active funds).Table 11: Firm Size StatisticsCommitted Capital ( Millions)Firm ClassificationAll Active Funds# FirmsAvg.25th50th75thLBO/VC/Mezz zz ezz (All)601,451.45492.251,219.221,917.29LBO / Grow th Equity (Large)132,520.961,770.002,225.002,805.00LBO / Grow th Equity (Small/Mid-Size)10650.52265.06632.50887.50LBO / Grow th Equity (All)231,707.73785.001,625.302,429.43Venture Capital (Large)122,527.761,665.501,968.082,044.98Venture Capital (Small/Mid-Size)17652.09357.45746.10905.00Venture Capital (All)291,575.06503.001,235.002,000.00Mezzanine (Large)31,789.471,684.201,818.401,909.20Mezzanine (Small/Mid-Size)6530.91421.25446.50468.75Mezzanine (All)9950.43425.00469.001,550.00Fund of Funds (Large)56,481.715,588.605,900.006,400.00Fund of Funds d of Funds (All)113,690.301,687.502,700.005,744.30Real Estate/Corp Venture/Debt estment Co-Investment /Co-Investment (All)122,149.03656.251,202.452,805.18Institutional onal onal (All)171,982.29600.001,550.002,700.00All Firms1071,841.77503.001,378.002,000.00Private Equity and Venture Capital – North America Report Page 8
Scope and MethodologyPART 3. Sections V - VII: Compensation DataPART 3. Sections V – VII are the quantitative or "How Much" sections of the report. We collected and analyzed data for various positions on salaries, bonuses, andcarried interest distributions. It also covers carried interest as a percent of the fund and as “dollars at work” from both “most recent fund” and “all active funds.”Although this data was collected in 2017, we believe it is useful for 2018 budgeting purposes.The table below is an example of the exhibits we provide to summarize data collected on Part 3 of the survey report.Sample Tables: PE 02. Senior Partner / Senior Managing Director (s) – All Private LBO, VC and Mezzanine combined (Details in full report)Job Title# FirmsBase Salary ( 000)Salary Bonus ( 000)Carry Distribution ( 50th75thLBO/VC/Mezz 1,567.8242,043.4903.92,283.82,706.0LBO/VC/Mezz 6.014589.0387.5555.7779.4LBO/VC/Mezz ---LBO/VC/Mezz 0341,715.4765.51,100.02,485.9Carried InterestJob Title# Firms% of Most Recent FundDollars At Work Most Recent Fund (Millions)Dollars At Work All Active Funds 50th75thLBO/VC/Mezz .350.9LBO/VC/Mezz %3.5%LBO/VC/Mezz LBO/VC/Mezz 7.4 2018 by Holt Private Equity Consultants, MM&K Ltd. and Buyouts Insider. All Rights ReservedPrivate Equity and Venture Capital – North America Report Page 9
Scope and MethodologyPART 3. Section V - VII : Compensation DataLevels Of Compensation:For each sample statistic we typically show average, 25th percentile, median and 75th percentile. Always bear in mind that the average could be influenced byparticularly high or low data points in the sample, especially if the sample size is small. Most firms that use compensation surveys set compensation targetsbetween the median and the 75th percentile.Firm-Weighted Data versus Incumbent-Weighted Data:Compensation reports based on employee surveys may show data on either an incumbent-weighted or a firm-weighted basis. Incumbent-weighted samples simplyinclude all employees in the sample, even if a significant percentage of them all work for the same firm; the results may therefore be unduly influenced by one ormore firms and won’t be representative of the overall marketplace. We can correct for this potential flaw by calculating the data on a firm-weighted basis. Forexample, assume there are 10 firms in a survey and nine firms have one incumbent on a position and one firm has 10 incumbents. The firm with 10 incumbentswould affect over 50% of the data. However, if we average the 10 incumbents in the one firm and treat them as one, we eliminate this issue. (When we combine allsizes of data, we modify between the employee and firm data by weighting small firm data once; mid-size data twice; and large size data three times.)Mix of Compensation Types:In our employee compensation tables we show salaries; salaries plus bonuses; and carried interest distributions. However, firms in our samples may view the mixof these compensation components in different ways, and give more emphasis to one or the other. Venture firms tend to pay high salaries and low bonuses, whilebuyout firms, with their roots in investment banking, tend to pay lower salaries and larger bonuses. Most firms see carried interest as the most importantcompensation component – at least for higher level employees – as it rewards long-term positive performance on behalf of the firm and its investors. In light of this,well-established firms whose partners already have a high net worth may well pay relatively low salaries and/or bonuses. This of course can vary based on theamount of management and other fees that are received as revenues.Carry DistributionsHistorically, we have added carried interest distributions to salary plus bonus. There is a “flaw” in this approach because many firms do not report thedistributions. They may consider the data confidential or simply do not wish to take the time to report them. Thus, if 10 firms report salary plus bonus, but only fiveof them report distribution we still have been dividing by ten to obtain salary plus bonus plus distributions. Starting in 2014, we do not add the distributions tosalary plus bonus. We show the distributions separately but only for those that reported a distribution. (From our above example, we divide by five rather thanten). Firms can decide for themselves how to use this data.Carried Interest Plan Allocation:Where applicable, we show three carried interest allocations. The first is the percent of the most recent fund allocated to each employee as carried interest, alsoreferred to as carried interest points. Employees typically share the 20 points of carry allocated to the GP, although a portion may be allocated to a parent company,or held in reserve for future hires and promotions. We also show the carried interest “dollars at work” for the most recent fund, which is the carried interest pointsassigned an employee multiplied by the size of the fund. For example, a partner with 1 point of carry on a 100 million fund has 1 million at work in that fund—inother words, the dollars at work that can result in realized investment gains. We also show the most important feature of carried interest - the dollars at work for allactive funds. 2018 by Holt Private Equity Consultants, MM&K Ltd. and Buyouts Insider. All Rights ReservedPrivate Equity and Venture Capital – North America Report Page 10
Scope and MethodologyPART 3. Sections V - VII : Compensation DataPART 3. Sections V - VII. Firm Classification: For our analysis of employeecompensation starting in Section V of this report we created 29 samples,described below. Institutional firms (groups sponsored by banks or other largeparents) are included in these samples unless otherwise noted.§ LBO/VC/Mezz: Combines LBO / Growth Equity, Venture Capital, andMezzanine firms.Large: 1.5 Billion or moreMid Size: 500 Million – 1.5 BillionSmall: Less than 750 MillionAll Firms§ LBO / Growth Equity – same as LBO/VC/Mezz§ Venture Capital – same as LBO/VC/Mezz§ MezzanineSmall/Mid Size: Less than 1.5 BillionLarge: 1.0 Billion plusAll Firms§ Fund of FundsSmall/Mid-Size: up to 3.0 BillionLarge: 3.0 Billion plusAll Firms Secondary/Co-InvestSmall/Mid-Size: up to 1.0 BillionLarge: 1.5 Billion plusAll Firms§ Corp Ven/Real Estate/Debt – All firms§ InstitutionalLarge: 1.5 Billion or moreSmall/Midsize: Less than 1.0 BillionAll Firms§ Canada – All Firms§ Asia PacificSmall/Mid- Less than 2.0 BillionLarge: 2.0 Billion plusAll Firms 2018 by Holt Private Equity Consultants, MM&K Ltd. and Buyouts Insider. All Rights ReservedStudied Positions:Job descriptions for all the position listed below (30 positions)are included in Section VI of this report.Investment Professionals§ Managing General Partner(s) / CEO§ Senior Partner / Senior Managing Director(s)§ Partner / Managing Director(s) / Portfolio Manager§ Principal / Vice President / Director(s)§ Senior Associate(s)§ Associate(s)§ Senior Analyst(s)§ Analyst(s)§ Venture Partner/Operations PartnerAdministrative/Support§ Chief Operating Officer (COO)§ Administrative/ Office Manager§ Executive Assistant§ Secretary/ Administrator§ ReceptionistFinance§ Chief Financial Officer (CFO)§ Controller.§ Assistant Controller§ Senior Accountant§ Junior Accountant§ Fund AccountantMarketing and Investor Relations§ Chief Marketing Officer/ Head of Marketing§ Marketing Manager§ Investor Relations Director/ Head of Investor Relations§ Investor Relations ManagerLegal, Human Resources and Information Technology§ Chief Legal Counsel§ Compliance & Risk Officer§ Chief Human Resources/ Talent Officer§ Human Resources Manager§ Chief Technology Officer§ Information Technology ManagerPrivate Equity and Venture Capital – North America Report Page 11
Scope & MethodologyPartial Participant List (Certain firms have requested anonymity)VENTURE CAPITALLBO/GROWTH EQUITYFUND OF FUNDSINSTITUTIONAL5AM Venture ManagementAdams Street Partners, LLCAmadeus Capital PartnersAnthemisAscension VenturesAsset Management VenturesAugust CapitalCharles River Ventures, LLCDCM VenturesEmerald Technology VenturesEmergence Capital PartnersePlanet CapitalF-Prime Capital Partners (Fidelity)Google VenturesGrotech VenturesIcon VenturesAdams Street Partners, LLCAlterna Capital PartnersAmpersand Capital PartnersAscension VenturesClairvest Group Inc.DCM VenturesEmergence Capital PartnersEncore Consumer CapitalFremont GroupGoogle Capital (Capital G)Great Hill Partners, LPGuardian Capital PartnersHGGC, LLCIndustrial Growth PartnersJ.M.I. EquityLinden Capital Partners57 StarsAbbott Capital Management, LLCBlackRock Private Equity PartnersC.M. Capital CorporationGlouston Capital PartnersManulife FinancialPortfolio AdvisorsRCP Advisors 3 LLCRenassance Venture Capital FundRand CapitalTrueBridge Capital PartnersTwin Bridge Capital PartnersBlackRock Private Equity PartnersClairvest Group Inc.F-Prime Capital Partners (Fidelity)Google Capital (Capital G)Google VenturesGuardian Capital PartnersiNovia CapitalManulife FinancialNorwest Equity PartnersNorwest Mezzanine PartnersNorwest Venture PartnersRand CapitalSilicon Valley BankTriple Tree CapitaliNovia CapitalInstitutional Venture PartnersLongitude CapitalMadrona Venture Group, LLCMassachusetts Capital Resource CompanyNorwest Venture PartnersOpen View AdvisorsPappas Capital, LLC (Pappas Ventures)Portfolio AdvisorsRiverVest Venture PartnersScale Venture PartnersSilicon Valley BankSV Health Investors, LLCThird Rock VenturesTL VenturesTrident Capital Cybersecurity Management LLCVivo Capital, LLCLovell Minnick Partners LLCNorwest Equity PartnersProterra Investment PartnersRand CapitalTecum CapitalTriple Tree CapitalVivo Capital, LLCWater Street Healthcare Partners LLCAdams Street Partners, LLCBlackRock Private Equity PartnersGlouston Capital PartnersManulife FinancialPortfolio AdvisorsRCP Advisors 3 LLCTrueBridge Capital PartnersTwin Bridge Capital PartnersMEZZANINEAvante Mezzanine PartnersBoathouse CapitalManulife FinancialMassachusetts Capital Resource CompanyNorwest Mezzanine PartnersPortfolio AdvisorsTecum CapitalYukon Capital Partners 2018 by Holt Private Equity Consultants, MM&K Ltd. and Buyouts Insider. All Rights ReservedSECONDARY/CO-INVESTMENT/57 StarsAbbott Capital Management, LLCREAL ESTATE/CORPORATE VENTURE/DEBTAlterna Capital PartnersAscension VenturesFremont GroupManulife FinancialPortfolio AdvisorsCANADAClairvest Group IncEmerald Technology VenturesiNovia CapitalManulife FinancialASIA/PACIFICAdams Street Partners, LLCBlackRock Private Equity PartnersePlanet CapitalGoogle Capital (Capital G)Manulife FinancialNorwest Venture PartnersPortfolio AdvisorsProterra Investment PartnersVivo Capital, LLCPrivate Equity and Venture Capital – North America Report Page 12
About The AuthorsR. Michael Holt 239) 594-5530Damien Knight and Nigel MillsDamien.Knight@mm-k.com 44 20 7283 7200David M. Toll and Joseph utsinsider.comHolt Private Equity Consultants specializes inassisting clients with private equity/venturecapital organizational and human resourcesissues, which includes compensation andperformance management. The Holt firm hasdesigned numerous carried interest and coinvestment plans, as well as annual incentiveplans. It also has consulted with various realestate and investment/funds managementorganizations.MM & K is a leading independent remunerationconsultancy specializing in the planning, design andimplementation of pay and reward strategies.Founded in 1973, MM & K is based in the City ofLondon and mainly focuses on executive and employeereward strategies and structures. In recent years wehave added other services to support our clients’ needsthrough the acquisitions of Independent RemunerationSolutions and the launch of higher talent, our specialistrecruiter of HR and reward professionals.Over the years MM & K has built up a huge amount ofknowledge and experience in the private equity andventure capital arena. This year will be the sixteenthconsecutive year that we have conducted a pay surveyin the UK / European Private Equity sector. In additionto the knowledge that we have gathered based on ourPrivate Equity Surveys we have also advised more than40 different PE houses on their own pay and rewardstrategies over the last ten years.We put into place strategies that ensure clientremuneration programs are integrated with businessgoals. Experience shows us that when a businessachieves this integration, the overall competitivenessand value of the business increases substantially.Our consultants’ expertise areas include rewardstrategies, HR, share schemes, law, accountancy, tax,corporate governance, business management andstatistics.MM & K is owned by its employees and directors.MM & K Limited is authorized and regulated by theFinancial Services Authority.Buyouts Insider is the leading source of news,data and analysis for the world’s private equityprofessionals, providing customers withcompetitive intelligence. We publish magazines,e-newsletters, and web sites; host webinars andlive PartnerConnect events around the country;and offer custom publishing services.He has been an “expert witness” on numerousoccasions.Prior to founding Holt Private EquityConsultants in 2001, Mike Holt was a consultantwith William M. Mercer, KPMG, and HayManagement Consultants, where among otherthings he conducted private equity/venturecapital compensation surveys. Previously, hewas head of compensation and employeebenefits at Norwest (now Wells Fargo) and forPillsbury (consumer products).Mike received his undergraduate degree at theUniversity of Notre Dame and a Masters Degreein Business Administration from RooseveltUniversity. He also served as a Lieutenant in theU.S. Army. 2018 by Holt Private Equity Consultants, MM&K Ltd. and Buyouts Insider. All Rights ReservedThrough some 25 employees across the country,we deliver market intelligence to the privateequity markets, powered by the world’s mosttalented team of private equity and venturecapital reporters and editors.For the past 30 years, Buyouts Insider and itspredecessors have been supplying valuable data,news, and analysis to private equity and venturecapital professionals around the world. Itsflagship products include the bi-weekly BuyoutsMagazine, the monthly Venture Capital Journal,the daily peHUB Wire and the InvestmentBenchmarks Report series of market intelligentstudies of industry returns, partnership terms andconditions, and employee compensation. BuyoutsInsider also recently introduced a guide to familyoffices.Private Equity and Venture Capital – North America Report Page 13
Compensation in the Private Equity and Venture Capital Industry Holt-MM&K-Buyouts Insider PE/VC Compensation Report 2018-2019 Preview . Compensation Report is a joint effort of three parties. They are compensation consultants Holt Private Equity Consultants and MM&K; and
