Breaking ranks: VC mid-management jumping ship for bigger bets, shinier titles

In the recent past, Varun Varma and Ankit Moorjani both left Lightbox to join Fireside Ventures and L Catterton, respectively. Similarly, Rahul Humayun and Akarsh Srivastava both quit Elevation Capital to join General Catalyst.

Tushar Behl, formerly at Alpha Wave, has now joined Glade Brook Capital, and Keshav Bagri has jumped ship from Bertelsmann India Investments to Riverwalk Holdings.

Joslin Jose, formerly with Atrium Angels, has now joined PeerCapital, while Alok Anand Patra, previously with Incubate Fund Asia, has moved to Sorin Investments. Meanwhile, Incubate Fund Asia has roped in Mayank Agarwal, who was at earlier at Saama Capital, to invest across Asian markets.

“Look, if I see the VC firm’s growth has stalled or the fund isn’t giving me the money to deploy and bet on founders, I’m going to feel throttled. VCs get rewarded for investing, and if I am unable to invest then there’s no point in staying back hoping for sunnier days,” said an employee who recently switched from one VC fund to another.

A top-heavy structure, better carried interest , different investing styles, and a preference for investment in other stages of a business are the reasons why the mid-management typically decides to move on, the person added.

In VC parlance, carried interest represents the percentage of profits paid to the fund manager.

One in 10 Principals…

While some mid-management employees leave because they chase more aggression, there’s also a class of staffers who move out because they’re not promoted within the firm.

“For every 10 Principals at a VC fund, there’s only one who makes it to the Partner level. The rest try their luck by moving around,” a Partner at a large VC fund told Moneycontrol.

The churn has also resulted in a hiring uptick.

Indian VC funds have seen a 15-30 percent increase in hiring activity, per Adecco, a talent solutions and advisory company.

Tushar Khandelwal, who runs Basil, a VC-focused recruitment firm, said, “People who didn’t make Partner are now moving out. VPs are moving out. So, replacement hiring is happening.

“The bulk of hiring is still at the entry level, but senior hiring has also picked up over the past year.’’

While there is some senior hiring in the PE / VC space, the VC Partner cited above said it is uncommon for a top executive to leave their fund and join a rival.

“At the top level, it is extremely rare that a Partner joins a rival firm as a Partner. No one wants to leave so much money (carried interest) on the table,” the Partner said.

Sometimes there is as much as $50 million in carry that a Partner is waiting to realise upon an exit from a portfolio company.

“In extremely rare cases will a new VC fund agree to make up for that kind of money for a Partner-level hire,” he added. “So they stick around for longer, waiting for their payday.”

Instead of joining rivals and waiting for their payouts, seasoned fund managers have also been branching out and starting their own funds, especially ones that specialise in secondaries. Moneycontrol has reported on this earlier.

Also, read: Uneven pay, opacity and central shotcalling force VC partners to strike out on their own

Better to reign in hell than serve in heaven

In some cases, more than one mid-management employee gets promoted internally, but only to become PINOs, according to another Partner at a large VC fund.

“PINO stands for `Partner in name only’,” he said. PINOs get the title of a Partner but their perks are limited in comparison to their peers at rival firms.

There’s no hefty payout, no carried interest, just the fancy designation to retain talent.

“Nobody wants to be a PINO,” the Partner said.

To avoid this, these mid-management people move to greener pastures, to funds where their talent is appreciated and they are rewarded, he added.

However, there’s a flip side to this. While most cross over to other funds, there are a few who take up the internal offer.

For them, “it is better to reign in hell than serve in heaven,” the Partner said.

This helps lower the employee churn as they’re happy being somebody at a not-so-well-known fund rather than being nobody at a renowned VC fund, the Partner concluded.

Juniors go for an MBA

A major reason why churn is more pronounced at the entry level is because Analysts, the juniormost layer on the investing side at VC funds, leave after their contract ends.

At larger VC firms — like Accel, Peak XV Partners, and most tier one funds — Analysts are only hired for a period of two years.

“By the end of two years, when their contract ends, these Analysts are mostly leaving to pursue an MBA or generally upskill themselves,” an employee at a large VC fund said.

At the Analyst level, life is more challenging as they do not naturally progress towards an Associate role, which is a level above Analysts.

The only way these tier one funds get Associates is if employees are directly hired at that level. These Associates then climb through the ranks to make Partner over the course of a few years.

While it is common for Principals and VPs to switch jobs for a better designation, not everyone is rewarded handsomely.

“While some Principals and VPs get a better job profile after switching jobs — that is not always the case. Because if they were eligible for a promotion, there is no reason for that to not happen at their previous VC fund,” the employee said.

Even though mid-management employee churn has been higher in the past year or so, it remains to be seen how many of these employees progress to becoming Partners and MDs who can shape what investing will look like in about 10 years from now.