VC versus MC: the ten major differences between venture capital and management consulting

In some ways, the venture capital and management consulting industries are more alike than they are different; but in other ways, it’s night and day. Take it from someone who’s done both.

Michelle Nacouzi
Oct 5, 2018 · 10 min read
Image for post
Image for post

Background on my perspective

Earlier this year, I made a career transition from management consulting to venture capital. The move was the result of my quarter life crisis (as I affectionately refer to it), during which I turned down job and graduate program offers that made me stressed and unhappy, and redirected myself toward things I found exciting and fulfilling.

#1: 10⁶ versus 10³

MC firms are mostly hired by large, established Fortune 500 companies (think: Wal-Mart, McKesson, AT&T, etc.), while VCs usually deal with small, nascent startups. Of course, there are exceptions — e.g. many MCs are hired by private equity clients to work with $100M companies, and many VCs are invested in unicorns that balloon to become much larger than most Fortune 500s — but in general, the financial figures are orders of magnitude apart.

Image for post
Image for post
Commonly used emojis in VC Slack channels.

#2: Steering a dinghy versus the Titanic

In the VC world, everything is about disrupting, innovating, and growing. In the MC world, clients use those same words, but in reality, are simply trying to stop the bleeding.

Image for post
Image for post
A dinghy versus the Titanic.

#3: Client-is-always-right mentality

Not only are the size and growth trajectories of the counterpart companies very different, but the working relationship power dynamics are opposite. While a VC is an investor in a startup, and sometimes even holds a board seat, an MC is hired by the client, and therefore answers to their direction.

#4: Value to whom?

Both VCs and MCs offer strategy and operations support to their counterparts, however, the incentives are much more aligned in VC.

#5: Relationships always matter, but more so in VC

Sales is a people-driven world (I have yet to finish Mad Men, but I still surmised as much), and VCs selling to investors and MCs selling to clients are no exception. Relationships always matter, but I would argue that they matter more in VC.

Image for post
Image for post
The demand and supply for VC and MC. Note: The orange stars indicate my assessment of where relationships are imperative.
Image for post
Image for post
Elon Musk in the 1990s versus Elon Musk in 2017.

#6: Inverted org structures

An MC makes money by sending armies of consulting teams out to clients for project work, and bills clients based on the time and peoplepower required. A VC, in contrast, makes money by finding the best deals (or startups) to back, and charges fees to investors based on assets under management (AUM) and asset returns.

Image for post
Image for post
Note: Diagrams only include investors and consultants, and omit operations and support staff teams.

#7: Hiring within or without a recruiting program

These structures yield very different recruiting strategies. Having either VC or MC experience is coveted, and as such, landing a full-time role in either industry can be pretty tough. But, where recruiting programs for MC are story-booked and rigid, for VC they are…nonexistent.

Image for post
Image for post
A small percentage (~5%) of PE/VC new hires came from school. Source: Thelander-PitchBook 2017 and 2018 investment firm surveys

#8: Both pay well, but VC is more of a gamble

If you receive an offer from a consulting or venture firm, you’re doing something right. Both industries offer competitive compensation, and while your friends in engineering or product management might initially get higher cash salaries, their trajectories likely plateau quickly whereas VCs and MCs will double a new grad’s compensation within 3–5 years.

Image for post
Image for post
Accounting for variability within firms, compensation for junior team members are generally commensurate across the two industries. Note: Principal/VP and Partner compensation is largely driven by highly variable factors — by bonus in MC ($1-$5 million) and by carry in VC (average 25.4%). Sources: Charles Aris 2018 Strategy Consulting Compensation Study (n=779) and VC Comp Survey Data (n=243)

#9: Neither is a 9-to-5, but VC is more conducive to a healthy lifestyle

I’m a millennial and as such, I have a “self-righteous” expectation to love my job and to have great work-life balance. Turns out, MC was not a great fit for those diva needs, and I have since drifted to VC. While neither is a typical 9-to-5 and both can be demanding at times, the subtle and structural differences are hugely important.

Image for post
Image for post
My life for 3.5 years.

#10: Both have a lack of leadership diversity, but MC has a clearer path to Partner

For females and minorities, most industries will be uphill battles until we start seeing better representation at the senior ranks. This is no exception in finance and consulting, where the lack of leadership diversity is startling.

Image for post
Image for post
Sources: TechCrunch (similar to data by Fortune/Pitchbook), Financial Times, CrunchBase 2017 Women in Venture Report, Forbes, and Workplace Gender Equality Agency (WGEA) data
Image for post
Image for post
Note: MC only includes data from Accenture, one of the largest global consulting firms. Sources: Noteworthy and Fortune

Conclusion: Both are great, but long-term career paths differ

I like to think that I’ve survived my quarter life crisis, but I can’t say with complete confidence that it’s actually over yet. For so long, my career aspiration was to be the CEO of REI — last year I even cold-call messaged him on LinkedIn, and he responded! — but MC offers a clearer career path toward that goal than VC, and yet here I am.

About the author

Michelle grew up in Northern California as the second oldest of seven kids in an immigrant household (🇱🇧). At UC Berkeley, she studied Environmental Sciences & Economics and was the President of a $10M housing nonprofit. After graduating she moved to New York City, where she worked as a management consultant for A.T. Kearney and now as an investment associate at Indicator Ventures. Her icebreaker fun facts are that she’s run the two oldest races in America, and that she can’t touch her toes.

Indicator Ventures

Indicator Ventures is an early-stage venture fund focused…

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store