Joining a first-time fund vs declining UMM as an associate?
Thoughts on joining a first time fund by reputable founders vs a declining UMM as an associate? Main thoughts are mitigating risk vs upside potential
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If a declining UMM, there is still risk as you will likely have to re-recruit in a much more competitive senior associate market. Also do not forget that the experience at a declining fund will probably be less than a fund with capital to deploy.
Is there more risk coming from recruiting out of a FTF vs. the more well known UMM though?
The real question is: Do you want to work for two years and no matter how hard you work on shit co’s end up recruiting all over again / having to re-establish yourself, likely ending up at a smaller first time fund or (ii) work for two years on shit co’s with a strong chance to quickly get promoted to do more for said shit co’s with the worst case of recruiting all over again.
Both options have long enough run ways because funds simply don’t crumble over night, but it’s much easier to put your head down and grind when things are going well vs when everyone is secretly considering jumping ship for something better. If the founders are reputable with line of sight to a closed fund and you can stand seeing them every day, in today’s environment, the decision seems easy to me.
But isn’t there more risk with recruiting given the recognition of the FTF? Like would there still be more value to the declining UMM?
No because 1) everyone knows what the declining UMM funds are, all it requires is someone being able to google fund size evolution, 2) you are likely to close much fewer deals at a declining fund. Remember, by the time you are recruiting out, it will be 3-4 years out. By then, the declining fund will have declined even further and have even less capital to deploy. I would 100% take the first-time fund if the first-time fund has already raised, and still lean towards the first-time fund if they have not as long as you have faith in the founding team.
I have many friends at declining UMM funds, not a single one has gotten another job in PE. You are forever stuck at a declining UMM fund with no possibility of carry even if you are top-bucket and get promoted. If you do not get promoted, say goodbye to your chances of a career in PE. It is very brtual to be at a declining UMM these days, and you set yourself up for failure. If the choice was a solid UMM or maybe even a declining MF (i.e. Carlyle), I would take the solid UMM or declining MF over almost all first-time funds, with the only exceptions might be any unusually large first-time funds depending on your risk tolerance.
Also remember that private equity, especially at the associate level, is an apprenticeship program.
Think about who you’re learning from - a declining fund signals poor prior investments, which certainly can help you know what to avoid, but won’t necessarily teach good investment judgment and diligence hygiene.
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