Consulting Vs. Venture Capital

A couple years ago, over the most delicious pizza in Cambridge, I was having a conversation with a Harvard undergrad after one of our workshops. His dilemma? Consulting vs. Venture Capital. He had summered at Bain and was debating between a return offer and a VC offer. That’s really the first time we had heard of what seem like really different tracks converging in one person’s experience. The reason? The paths are really different, but they attract similar types of underlying traits. You may be experiencing the exact wrestling match that our friend from Harvard was. That’s why, below, we’ve compared and contrasted Consulting and VC. Keep in mind: we’re not recommending one or the other, but simply doing a high-level breakdown of both industries. Our recommendation on a certain industry would be based on your background, skill set, and career goals. If you’re looking for some additional guidance, book a 1 hour coaching session today.

Without further ado…

Differences Between Consulting and VC

Type Of Work

In consulting, you work with large, established, slow-moving organizations. However, in VC, someone might have a new idea today, and a product and customer tomorrow. There is a rapid change you have to keep up with. The benefit to working with established organizations? You have visible competitors for competitive benchmarking. In the VC world, market research is for markets that don’t yet exist. This type of work obviously involves more unknowns; your research is to examine if a company can be a player in a new market.

Compensation

Consulting salaries are pretty predictable – you are paid on salary and a bonus based your and the firm’s performance. VC, on the other hand, involves a lower base salary, almost no bonus, but part of the share of the fund. Your salary is paid out of the fund’s 1.5-2% AUM charge. The real moneymaker in VC? Carried interest. This is where you (and the partners) really get paid, but be aware, this payout depends on when companies sell. Even then, the payout structure is governed by the fund, not the sale. For example, the firm’s capital has to be returned before you get paid. Until the hurdle rate is met, you don’t get your money.

Work Culture

VC is the “new professional.” The name of the game, especially at the junior level, is all about sales and hustle. Contrast that with consulting, where the opportunities are brought to you, the dress is business casual, and you operate in an office setting (even with the travel).

Travel

There is definitely more travel in consulting; you go where the work is. In VC, it’s beneficial to invest locally – it helps maintain relationships.

Similarities Between Consulting and VC

Candidate Profile:

Both consulting and VC are for people who consider themselves future business managers and shapers of the future business world. Both industries attract incredibly intellectually curious people who question the status quo. In VC, you may be learning about mechanics in space, and in consulting you may be exploring the best practices to raise the most chickens. Both industries employ the “expert for a day” model, requiring you to do a deep-dive on industries and sectors you may have no background in.

Professional Development:

In both consulting and VC, you rotate on a lot of different projects, and you’re managed by a lot of different people. Specifically In VC, you’ll be a part of squads that carry on for a longer period of time. Another thing to keep in mind: there are not as many levels in VC – you’re either an analyst, associate, or Partner. The industry really is a meritocracy – you’re at a certain level based on what you bring in. VC firms compete like a bank competes; not for work, but for returns. Sometimes, they anti-compete because they don’t want to go on investments alone. In general, you don’t move VC firms very often – it’s not a career. You leave for an operating business or financing (family offices, investment banks). The industry is not as structured, more organic, and definitely more boom or bust. However, both consulting and VC are macro-cyclical.

Did we miss something? Still struggling to decide between the two? Leave us a comment below or reach out!

MC Links

• Decks vs Derivatives: 6 Differences between Consulting and Sales & Trading
• 5 reasons to choose strategy consulting over financial advisory consulting