The "Get Rich Slow" VC Business

Jeff Bussgang puts a fine point on something that goes largely unsaid at most venture firms: Many current partners have never received a carry check. (Carry is the proportion of a VC firm's investing profits that goes to the partnership. In theory, it should be much more of a motivator than salary.)
    "I've been in the venture business over 10 years and still haven't received a carry check," complained a VC buddy to me the other day.  I was so stunned by this comment that I decided to conduct an informal survey and discovered that many of the 30 and 40 something VCs who have been in the business 6-10 years find themselves in a similar predicament.  Now I admit that a VC whining about lack of carry may sound tiresome to an entrepreneur, but it's a phenomenon worthy of some consideration nonetheless, as how VCs get paid underline their motivation - and has been a driver for much of the VC personnel movement in the last few years.

Yup, no question that's true, and it's definitely leading to a salary-centric business where firms with the largest management fees are better able to buy talent, purely on salary. It's leading to seven-figure comp schemes, virtually none of which is variable with VC firm performance -- which is bad, of course.

Now, this doesn't make a no-carry VC any more sympathetic. After all, it's hard to feel badly for people earning seven-figure incomes, even if it's not coming from performance. But LPs should care. They should worry about the surprisingly large number of firms where partners continue to get rich, despite the absense of carry checks. It's all internal economics, of course, but it's also a serious misalignment of interests.