A carry comp kerfuffle in Micro VC land


This post is by Jason Calacanis from Calacanis.com


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The SJW crowd piled on to a job posting for a part-time VC job at a micro VC yesterday. The job posting was for 20 hours a week and the compensation was based on a share of the carry.

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Here is how carry works, briefly: if the Fund invests $2m on behalf of investors and turns it into $22M (11x, cash on cash) the gain would be $20M. The carry would be 20-30% of that gain, depending on the deal with LPs (limited partners), which means $4-6M in gain.

[ Note: A 10x fund is the outlier goal. ]

If the Fund manager gives this “Chief of Staff” position 20% of the carry it would be $800-1.2m for a part-time job. Note: 20% would be very generous if the person had cash comp, but if the person takes cash I would say 20% would be in the ball part. Twenty percent of a 20-30% carry is 4-6% carry to the Chief of Staff.

If the micro VC did 3x “cash on cash” it would have $4m in gains and $800-$1.2m in carry. The individual in this back-end comp position would get $160-240k.

If this position vested over say four years, that would be something in the range of 4,000 hours of work for $160,000 to $2.4m — or $40 an hour to $600 an hour.

Of course, you wouldn’t have any comp today — that’s the trade-off you have the choice to make.

The argument here, of course, is that the micro VC, who is offering this partnership opportunity, and who gets zero cash comp himself, is taking advantage of the person who takes this part-time gig.

Oh lordy, lordy … I wish I had seen this job description when I was in my 20s! Please take advantage of me and take 10 or 20 years out of my career path.

The micro VC has since, under the weight of the social media mob, put the job up as cash and carry or just carry — at the candidate’s choice. CANDIDATES: take as little cash as possible and fight for every point of carry! The math above is going to change your life and the cash comp never will.

Seriously, if I were 25 years old and applied to this position I would rather sleep on my mom’s couch, drive for Lyft 40 hours a week and get all the carry I could. 60 hours a week isn’t a death sentence, and if you want to propel yourself to the next level the quickest way to do that is to get equity compensation.

Sure, a single parent with three kids is not going to be able to take this gig. Neither is a married couple with a $10,000 a month mortgage and three kids in private school — that couple needs to work at Yahoo! or IBM and take down big salaries — which is their choice for starting a family and buying a big house with a huge mortgage.

Certainly, my mom, who worked 4-5 jobs a week and clocked 70-80 hours a week to provide for our family, wouldn’t have been able to — but one of her three sons would have! That’s the American dream as far as it was taught to me: the parents bust their asses and give their kids the killer opportunity.

I look at an opportunity like this and compare it to spending $30,000 a year on college, or people staying at home playing video games/watching TV for 4-5 hours a day — which is the national average!  

Think about that for a moment, if your child presented you with the scenario of working 1,000 hours for no cash comp with lottery-ticket-level back end vs. four years of college and $120k in debt, which would you advise them?

If your kid is playing video games and/or watching YouTube/Netflix for five hours a day, getting them to pull the plug on that nonsense and invest in their career is a serious discussion some parents need to have.

Now, before you attack me as a cold-hearted capitalist (the latter true, the former only half true), you should know that we don’t do unpaid internships or free positions of any type. We don’t need to do that, as we have a modestly profitable business and, candidly, the risks around internships are too great these days (bad PR, a distraction for management and legal exposure).

Bottom line: the social media mob is giving really bad advice in this case. Trust me, someone who fought their way into the industry and became the GOAT angel: take the carry not the cash!