Thoughts on careers in startup developers? It seems upsides could be good if the fund performs well. Eg, assuming an initial equity commitment of £150m and an initial carry as an analyst/aso of 1-2%, how do you value the chance to increase your carry share in following funds (being the headcount light)? On the other hand, how do you weight the chance to go bust easily and quickly, and being unemployed with no brand on CV?
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Based on the most helpful WSO content, careers in startup development can be quite the rollercoaster with high risks but also potentially high rewards. Here's a breakdown of the upsides and potential downsides:
Upsides: - Equity and Carry: With an initial equity commitment of £150m and a carry of 1-2%, there's a significant financial upside if the fund performs well. As you progress in your career and potentially increase your carry share in following funds, the financial rewards can grow substantially. - Growth Opportunities: Startups often have a lean team, which means you might have the chance to take on more responsibility and grow professionally at a faster rate than in a more established company. - Impact: Your work in a startup is likely to have a direct impact on the success of the business, which can be highly rewarding and motivating.
Downsides: - Risk of Failure: Startups can fail for a multitude of reasons, and the risk of the company going bust is real. This could leave you unemployed and without a well-known brand on your CV, which might make it more challenging to find the next opportunity. - Volatility: The startup environment is inherently volatile, with frequent pivots and changes in strategy. This can lead to job insecurity and stress. - Work-Life Balance: Startups often require long hours and a high level of commitment, which can impact your work-life balance.
When considering a career in startup development, it's important to weigh these factors based on your personal risk tolerance, career goals, and financial needs. If you're comfortable with the uncertainty and drawn to the potential rewards, it could be an exciting path. However, if stability and a well-known brand are more important to you, you might want to consider more established firms.
As for increasing your carry share in following funds, it's a common practice in the industry for successful team members to negotiate better terms as they prove their value to the fund and take on more responsibility. However, this is not guaranteed and is often a reflection of both individual and fund performance.
Remember, every career move is a gamble of sorts, but in the world of startups, the stakes are just a bit higher. Keep your bananas diversified, and don't put all your peels in one basket!
Sources: Starting a Development Company, To Those Who's Had A Successful Career In CRE, What Advice Do You Have For Younger Generations?, Why You Should Reject that Start-Up Job, How many of you actually plan on going independent?, Interview with a Senior Software Developer for a Prop Trading Firm
Bump
What is a "startup developer"?
Definitely don't want to give developers free beer on tap and a pool table in the office. Literally nothing will get done.
Meant newly founded funds focused on developments / heavy refurbishments and operational real estate, mainly investing in JV and seeking big pocket capital partners for coinvest. Often asset class focused.
So just a developer without a track record?
I think what most people seem to think - trusting a huge amount of money to a person/people who haven't shown they can effectively manage risk through the construction process is a bad idea. Generally people get around this by working for a big developer, kicking ass there, and developing the relationships and trust with counterparties while working under someone else aegis such that when they do go out on their own, a lot of the "who the hell is this guy, and can he perform?" questions are already answered. Obviously it's a whole new world when you don't have the operational and balance sheet support that an established developer gives you, but that's why new guys in the industry start out with not-particularly-advantageous splits and fees, or why they co-GP, or act as fee developers.
What if we add the assumption of founders/seniors with strong CV and track record in that specific asset class? And as aforementioned also an initial equity commitment to the new fund (eg £150m). How would this change the view? Assuming you enter as an analyst/aso with 1/2% carry, in a small team (<10 between investment, development, etc) and a long term view of staying and increase that carry share over time (considering you were an early joiner who believed in the business).
If you've got principals with a strong track record and substantial funding, then I don't see an issue - that's a dream scenario.
I wouldn't expect more carry than that, or not substantially more. Maybe this shop is different, but "early joiner" doesn't mean "constantly increasing ownership share." If you're not taking on any risk, you are going to be artificially capped in how much your founders can afford to give you. After all, some of that carry is going to go to new hires, and at some point it isn't tenable for them to give away half the upside while shouldering all the guarantees, etc.
What do you think could be a reasonable growth of your carry share assuming you start for instance at 1% as an analyst? I know this is probably very aleatory and probably impossible to estimate as is very case by case, but maybe you’ve some views. Thanks.
I guess it depends. If you end up being someone who brings in business and has a senior role at the firm.... 5%? I think, from the principal's point of view, the argument would be that if you grow the business, your 1% slice ends up being worth a lot more. If you get your 1-2% in the early days when the fund has $150mm to deploy, that's great... but the goal is to have that same 1-2% when the fund is billions at a time, not to get a few extra points on the smaller number.
Devs at a startup, hence "startup developer". You know, the people who will be hiring you to shuffle their paperwork in a decade when they cash out their bullshit app in the public sucker's markets.
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