Few issues are more thorny in corporate venturing than compensation. A major problem for the stability of corporate venturing units is that it is generally perceived that those working in corporate venturing are paid less than their peers in independent venture capital.
Thus the headline finding that top-ranking corporate venturing executives earn about a third of what their independent peers do, in a survey carried out by US-based recruitment consultant J Thelander Consulting in partnership with the Corporate Venture and Innovation Initiative – Global Corporate Venturing is a member – is unlikely to surprise (see analysis, page 8). Yet we believe more transparency on this topic will be a good thing for the industry.
Corporate venturing unit leaders earn an average $304,250 a year, with a further $164,865 as cash bonus. A similar 2012 survey found top-ranking financial venture capitalists (VC) earned an average $541,329 in the 2011- 12 period with a bonus of $868,092.
It should not be forgotten that people working in either position are relatively well paid compared with most western world professionals, and doubtless corporate venturers would be well advised for their own sanity to avoid obsessing about this issue.
Yet for corporations, the pay disparity presents an obvious conundrum – how do you stop VCs poaching your best talent when they pay substantially more?
In this context, recent academic findings from Carnegie Mellon and Harvard academics Michael Ewens and Matthew Rhodes-Kropf, which predict individual partners are up to five times more important than their firms as a predictor that start-ups will perform, suggests corporate venturing groups that underpay staff are likely to be undermining the most important reasons for their success.
Yet the corporate brand lends significant clout to individual corporate venturing executives. You can easily understand why corporations are reluctant suddenly to increase the pay of those who work in corporate venturing who may have moved from elsewhere in the group, which could be corrosive to culture in the wider business.
Having figures to understand the paradox of pay in corporate venturing is doubtless a good thing. It will be interesting to see, as the industry matures, whether more groups in corporate venturing embrace carried interest, the typical 20% performance pay from long-term profits, which is the norm in venture capital. Only nine out of 60 corporates surveyed for the report received carried interest or phantom carry.
At Global Corporate Venturing, we would be interested to know what those in the sector think about the relatively low pay for the industry’s executives compared with VC peers. Is it fair or is it an issue that should be championed more by us? Thoughts are welcome.
Spotlight on media
Keep your eyes peeled for our soon-to-be-published special report on the media sector, sponsored by US-based law firm Baker Botts – Content in the connected world – digital media and the new age of distribution.
The report looks at how the media sector has been reshaped in the internet age, and looks at the lively development of content in response to the rapid changes brought about by the move to smartphones and the disruption of the distribution chain caused by the likes of search engine Google and social media businesses Facebook, Twitter and LinkedIn.
The verdict appears to be, from those in the sector, that these changes have not been as destabilising as first thought. While sectors like music, newspapers and book publishing have been put under pressure, the television and film businesses have remained relatively insulated. In this month’s issue we have also written our sector feature on media, and it is well worth reading our interview with Hearst Ventures’ Kenneth Bronfin summing up what the corporate venturing unit of Hearst Corporation has been doing in its nearly two decades in business, which started out with the unit backing search engine Netscape.
Media is changing rapidly, and many groups are turning to corporate venturing to keep an eye on how it Is developing.
Do read the report to find out what we think about how it is developing.