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16 June 2013

Follow the money

As we documented in a book review of Harvard Business School professor Josh Lerner’s The Architecture of Innovation, compensation in corporate venturing is an area of fiendish complexity, which is dogged by the perversity of human psychology.

Author: Toby Lewis, Editor

Follow the money. This cliché is the key to understanding working in business, and corporate venturing is no different. 

As we documented in a book review of Harvard Business School professor Josh Lerner’s The Architecture of Innovation, compensation in corporate venturing is an area of fiendish complexity, which is dogged by the perversity of human psychology. 

Most telling is the issue of carried interest, which is the norm in the venture industry, with which the corporate venturing industry needs to compete for talent. Lerner estimates in his book Xerox Technology Ventures, the corporate venturing unit of US-based printing business Xerox of the late 1980s to 1990s, made capital gains of $175m on its $30m fund or an internal rate of return of at least 56%. Given this the corporate venturing executives were due for a performance pay-out of at least $44m. 

Lerner writes: “Once [Xerox’s top management] understood that mid-level functionaries in an obscure initiative were going to be the highest paid executives in the corporation, their enthusiasm for the programme disappeared overnight. (Never mind that the only reason they were to paid so much was because they had created so much value for Xerox.)”

However it is easier to determine that an executive for OBSCURE NAME VENTURES is doing a good job, than when you are working for the venturing unit of chip manufacturer Intel or Xerox, which are brand names with huge clout.

Given this thorny issue, to help set compensation standards for the corporate venturing industry industry, CVI², the Corporate Venturing and Innovation Initiative, and JThelander Consulting, a compensation specialised consulting firm, are partnering on a compensation survey.

Please note we are part of CVI², which also includes consultancy firm Bell Mason Group, accountancy firm Deloitte, consultancy firm Doblin, law firm DLA Piper, and US-based bank Silicon Valley Bank.

Heidi Mason, managing partner, Bell Mason Group and co-founder CVI2, said: “Compensation plays a critical role in the ability of corporations to attract and retain the talent needed to ensure the ongoing success of corporate venturing programs.  However, determining appropriate packages and career path trajectories for corporate venturing professionals has always proved challenging within large companies whose HR [human resource] systems are tuned to their established business roles.” 

Mason added: “With the rapid growth in the number of CVC units, we believe that initiating a formal compensation survey now could not be more timely or important in establishing external benchmarks for corporate venture professionals.  We are pleased that the NVCA Corporate Venture Group also shares this view, and has contributed to and formally endorsed the CVI2- JThelander 2013 Compensation Survey.”

Should you have any questions, contact Jody Thelander, J.Thelander Consulting, 
or Liz Arrington, Bell Mason Group, on  JT@JThelander.com or liz@bellmasongroup.com 

May the compensation debate commence!

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