Question 1

What is the difference between private equity and venture capital?

Accepted Answer

Private equity buys control of profitable companies using debt and improves them. Venture capital buys small minority stakes in companies that mostly fail, in exchange for the few that do not. Private equity pays more cash at every level, and more than twice as much by the top of the ladder. Venture makes it up in carry that may take a decade to arrive, if it arrives.

Question 2

Private equity vs Venture capital: what you are buying

Accepted Answer

Private equity: Control of a profitable company, usually with debt, held four to six years. Venture capital: A minority stake in an unprofitable one, no debt, held eight to twelve years.

Question 3

Private equity vs Venture capital: what the job is

Accepted Answer

Private equity: Modelling, diligence, negotiation, then years of board work and operational involvement. Venture capital: Sourcing, meeting founders, forming a view quickly on very little data, then supporting from a distance.

Question 4

Private equity vs Venture capital: how returns work

Accepted Answer

Private equity: Most investments return capital. The fund works if the average deal works. Venture capital: Most investments return nothing. The fund works if one deal is extraordinary.

Question 5

Private equity vs Venture capital: how you get in

Accepted Answer

Private equity: From banking, on-cycle, through headhunters, on a defined timetable. Venture capital: From operating, product, consulting or banking, with no timetable at all. Networks matter more here than in any other track on this site.

Question 6

Private equity vs Venture capital: how the money arrives

Accepted Answer

Private equity: Solid cash throughout, then carry from around VP, paid when a fund returns capital. Venture capital: Low cash for years, then carry that is long-dated and highly uncertain. Most junior hires leave before any of theirs vests.

Question 7

Which pays more, private equity or venture capital?

Accepted Answer

Private equity: $135k (Analyst) at the bottom of the ladder and $1.2m (Partner) at the top. Venture capital: $95k (Analyst) and $505k (Partner). Cash is only part of either. Private equity: Carried interest is not in these numbers and is the reason people take the job. It typically starts around VP, vests over several years, and pays only when a fund returns capital, so a principal at a fund that underperforms can earn less over a decade than the bands suggest. Venture capital: Cash is the small half. Carry is long-dated and highly uncertain, a fund can take a decade to return capital, and most junior hires leave before any of theirs vests. Seed funds run small management fees and pay accordingly; growth funds pay closer to private equity.

Private equity vs Venture capital

Side by side

Which one to pick

Private equity

Venture capital

Other comparisons

	Private equity	Venture capital
What you are buying	Control of a profitable company, usually with debt, held four to six years.	A minority stake in an unprofitable one, no debt, held eight to twelve years.
What the job is	Modelling, diligence, negotiation, then years of board work and operational involvement.	Sourcing, meeting founders, forming a view quickly on very little data, then supporting from a distance.
How returns work	Most investments return capital. The fund works if the average deal works.	Most investments return nothing. The fund works if one deal is extraordinary.
How you get in	From banking, on-cycle, through headhunters, on a defined timetable.	From operating, product, consulting or banking, with no timetable at all. Networks matter more here than in any other track on this site.
How the money arrives	Solid cash throughout, then carry from around VP, paid when a fund returns capital.	Low cash for years, then carry that is long-dated and highly uncertain. Most junior hires leave before any of theirs vests.
Bottom of the ladder (total, midpoint)	$135k (Analyst)	$95k (Analyst)
Top of the ladder (total, midpoint)	$1.2m (Partner)	$505k (Partner)
What the cash leaves out	Carried interest is not in these numbers and is the reason people take the job. It typically starts around VP, vests over several years, and pays only when a fund returns capital, so a principal at a fund that underperforms can earn less over a decade than the bands suggest.	Cash is the small half. Carry is long-dated and highly uncertain, a fund can take a decade to return capital, and most junior hires leave before any of theirs vests. Seed funds run small management fees and pay accordingly; growth funds pay closer to private equity.