(aka Platform Advisor)
Tl;dr: For experienced people, being an operating partner/platform advisor is a great end-of-career job assuming you intend to stay 6+ years with the firm and want to roll up your sleeves again. Otherwise, stay in actively operating roles.
For early career associates, working at a VC/PE is a great springboard into a top tier business school. If you don’t intend to go to b-school, climb the ladder in operating roles (or start a company if you can tolerate the risk).
Pros
- Learning
You will be exposed to an incredible breadth of operating models. You’ll see direct/indirect, every geo, PLG/SLG, every ASP order of magnitude, etc. Moreover, you’ll get the chance to think deeply about the hardest questions since you’ll get asked what people cannot otherwise find via search or GPT. - Compensation and Benefits
Compensation is good to very good but not exceptional. Benefits are excellent.
Working at a VC is lower risk/lower reward than working at a startup. You’ll earn a better OTE at a VC but miss out on the potential for a large payout in the very rare event of a spectacular startup exit.
Expanding on compensation a bit, you’ll get base and bonus and likely some amount of carried interest (aka carry). Carry is complex and please take the following as directional/educational and not legally binding in any way.
Carry Vesting: Many folks are familiar with startup equity which vests over 4 years with 25% after 1 year and monthly thereafter. Moreover, startup options, once vested, can be purchased (converted to shares you own) while you are employed or, typically, for up to 6 month after you leave. In contrast, carry is 100% ‘vested’ but is only applicable while you are actively employed by the VC — once you leave, it is gone.
Carry Payout: Most explanations talk percentages at the deal level. For operating partners, it is easier to discuss dollars at the fund level. So, let’s say you get $1 in carry. This means you get $1 if/when the fund returns 2x. The basic math is:
your payout = ($ carry granted) * (total fund return – 100%)
Importantly, there is usually no payout until a hurdle rate is achieved for total fund return; for example, 1.75x. That imposes a timing delay more than an absolute payout risk since the benchmark compound internal rate of return (IRR) for VC/PE ranges from 20% to 30% (or 6.2x to 13.8x over a 10 year horizon). 1.75x implies a mere 5.75% IRR.
Also, since VCs invest in companies over time (not all at once at the start of the fund) and because exits happen 4-6 years after investment, you usually need to be with a VC/PE for 6+ years to realize your carry payout.
Given a 10 year fund lifetime, $1 in carry can kinda-sorta be thought of as $0.10 per year. The saving grace is that you’ll (likely) get equal (or more) carry every time a new fund is raised. Given that firms raise new funds every 2-4 years, you end up with layers and layers of carry if you stay long enough. - Job Security
Since most funds have a 10 year lifetime and (should) run on guaranteed management fees, you’ll be semi-insulated from economic gyrations. In tough times, VCs slow or stop hiring and may shrink through attrition since RIFs send very bad signals to investors (limited partners). - Network Building
You’ll interact with top operators (CxOs) and top investors on a daily basis. - Inside Track for New Jobs
You’ll really get to know companies you might join. You’ll also get early and/or exclusive access to roles that are not otherwise posted – ex. Chief of Staff to CEO. - Lower Stress
The stakes are lower as an advisor/consultant than they are as an operator. As such, you are more insulated from the emotional highs & lows that happen quarter to quarter in regular company.
Cons
- Career Development
Most operating partners I meet are folks who had successful careers leading large teams but are looking to roll their sleeves up doing more ‘individual contributor’ work. They grew weary of sitting in meetings and ‘merely’ deciding/delegating. They want to DO.
This means that if you love to manage/develop people and to decide & delegate, then this is definitely not the job for you.
Operating partners are consultants / advisors. Once you become an advisor, I feel you are less attractive to regular companies if for no other reason than the fact that you’ll be directly managing zero or very few people. As in a consulting organization, teams are constantly being assembled and disassembled.
Having observed and experienced this earlier in my career as in industry analyst, I feel advisors get stale after 4-6 years. They become an inch deep and a mile wide and cannot avoid mental muscle atrophy on system-level thinking (since they are not exposed to the whole organization) and on change management that is critical in the last-mile (since they are not exposed to all of the people).
Though either a pro or a con depending on your perspective, operating advisors are jacks-and-jills-of-all-trades. You need to be able to advise executives 1:1, run workshops, speak at conferences, analyze data, interview CxOs, create content, conduct due diligence, speak with limited partners, project manage mini-consulting engagements, etc. - Proving Impact
It is impossible to prove ROI from advisory but your team will likely be expected to do so. Trying to measure impact from this work is a fools errand and therefore a waste of time and energy. By analogy, you know if you had a good mom or a bad mom even if her value is unquantifiable.
I think the better approach is for VCs to allocate some % of their management fees to the platform team and then just locally optimize the performance of that team.
I’ll leave it at that. - Being “On Call”
To be a strong consultant/advisor, I’ve found one needs to be able to react 16/7/365 (16 rather than 24 b/c you have to sleep). Zero notice, rush jobs tend to be more common in VC/PE than in regular companies. - 2nd Class Citizen
You’ll be a 2nd class citizen and need to be OK with that ego-wise. At PE/VE firms, the 1st class citizens are the investors. - Compensation & Benefits (see pros)
Other
- VC vs. PE
With respect to the operating partner role, they key difference between VC and PE funds is that the former are minority owners and the latter are majority. As such, VC operating partners are usually reactive (pull) and tend toward quick, in-and-out advisory. PE operating partners dive much deeper and can be proactive (push) and tend toward deeper consulting engagements.
Either way, operating partners rarely if ever actually operate.
Getting a VC/PE Operating Partner Job
Quite obviously, these jobs are rare. Things that increase your odds:
- Know the hiring manager
- Perhaps you worked together while s/he was operating
- Perhaps you were at one of their portfolio companies and impressed them (though VCs avoid hiring people directly out of portfolio companies
- Direct operating experience that aligns with the VC’s focus/strategy
- Industry (ex: SaaS)
- Scaleup (ex: $10M to $100M)
- Demonstrable depth & breadth of knowledge
- Prior consulting experience
- Strong professional pedigree (history of success / advancement at marquee companies)
- Strong academic pedigree
- Good at taking IQ tests (they will probably require Wonderlic or CCAT)