Am I potentially shooting myself in the foot?

I have thought about it, but the issue is the location.

Addinator:

If your friend has a second job, and you are saying that many times you end up working a part time job because your current fund doesn't always have enough projects to pay you why wouldn't you simply add more hours with the start up and keep the job you have? That strikes me as the best route to go, simply start doing more work with the manufacturing company until it takes over your time and you can't avoid going full time.

Dingdong08:

This is a tough question because, in my opinion, neither one is a standout over the other. For example, this isn't a case of "I'm with a BB/MM IB, established PE/HF, MBB, or an F500 and have the opportunity to join a newer but growing company."

The questions I'd myself ask (both to myself and to others) would be and this isn't all inclusive:

-what is the number and what are the chances of your fund growing (I'm assuming HF?) to a critical mass where management fees alone would allow you to make a market rate salary, forgetting bonus/incentive fees. 2% of $20MM isn't enough to keep the lights on so how actively is the GP raising funds and what's the success rate? What's his background (can he raise money on past performance and from previous LP's or is everything moving forward de novo based on performance that's being built now?) and how long can he survive not making much. Are you the only other employee, and if not, if/when he raises more money are you sure you'll move up the ranks or will he need to bring in people more senior than you? Have you had the explicit conversation that if/when he raises more money, you will move up? What's his target AUM, his overall goals (does he want to run a $300MM fund, which there's nothing wrong with, or is he shooting for the stars) and why is it going him so long to raise it?

-without getting into the details of the operations of the start up, is there a sales pipeline that shows projected growth in revenue or is it more along the lines of "customers are telling us they'd order more." Do you have the capital to fund growth-SG&A growth, working capital, etc? These are not trivial matters and you could have a great pipeline of business but blow yourself up not being able to fund growth, especially with regard to working capital which so many people overlook as entrepreneurs (you can't be net 60 on receivables and net 15 on payables without some decent financing in place and while you can wear many hats and live and work in your office to lighten the SG&A load, you can't do much about the receivables/payables loop, especially if your customers can dictate those terms). Can you raise more outside equity to fund the business? How long can you live with little to no salary? Put together a model to see where you can start drawing a salary and where you'd be stretching working capital. What's the true viability of the company-will it make it and what's it truly going to take to make it? Do you like the guy you invested with enough to be a long term partner? People who haven't had partners don't realize this, but it's pretty much like being married but it's even more difficult to end because the divorce is worse.

-what are the odds of landing another finance job in Atlanta? I know they exist but they're not in abundance. Would you enjoy moving to the West Coast or does that sound like an awful idea to you and you'd want to run back in 2 years (which may not be possible if you're running a successful, growing company there).

Please don't answer these questions to me, but it's just a list off the top of my head. The main question is what do you want to do? Do the analysis between the two options and if all else is relatively equal, which life would you like? I wouldn't base it completely on possible incomes because I know finance guys and entrepreneurs in boring sounding businesses who have made tons of money (and those that have made little to none).

_The GP has a fairly good background in Investment,which has allowed me to learn something new everyday. In addition, he has been successful at raising capital from previous and new investors. The fund has 2 analysts and the GP. I have discussed the possibility of climbing the ladder as the firm grows but nothing is guaranteed (many people lie), and yes, the goal is to grow the fund to over $100MM. The fund has only been in business for 2.5 years.

_Yes, the start-up has a few sales/contracts lined up to stay above water, and some distributors have told us they will order more as soon as we grow our inventory. Our receivables are 30 days, our working capital is positive but still at the start-up phase. Together, we both have about $120K in emergency fund to be injected in the company if needed. So far we have a good relationship and know that fights will occur, but we are willing to take the risk. I have plans to reinvest my profit (if profitable) to start my own ventures. In terms of living without a salary, I could go for as long as 6-8 months.

_The start-up is on the west coast and the chances of landing another finance HF or PE job there would be very minimal since I do not know anyone there and graduated from a semi-target. As I stated, it would be another uphill battle.

_Without too much details, given the inside information I know about the fund I would say that the start-up may grow faster than the fund, but we can never predict the future.

Thanks!

grosse:

I've worked for a pair of small hedge funds (but larger than yours) and can tell you that AUM growth ALWAYS moves more slowly than principals expect. So if you are unhappy with your pay right now, don't drink the cool-aid and think AUM is going to ramp dramatically and so will your pay.

Still, I think your best option is to continue at your current firm, get experience and network, and try to find a gig at a larger, more stable platform.

With no way to judge the prospects of your start-up, two guys working full-time and making $15k each sounds far from secure. In three years, are you each going to pull in $45k or be making serious money? If you're not going to be making serious money, it sounds like you could continue to assist as it is more of a hobby / resume builder.

Thanks, I would say that we have enough sales down the pipeline to keep us above water until the end of the year. I don't worry about my friend because his second job is paying him good money. My plan is to look for employment while working at the start-up until it really grows. I could also go without a salary for 8 months.