Sourcing Model Discussion
Questions regarding the sourcing model that many GE shops have (Summit, TA, Insight, etc.). There have been discussions in previous years but new information / data points always arise so I am starting anew in advance of on-cycle recruiting.
How much of associate compensation is tied to success hitting the phones? Is your bonus on a per-deal basis? Is your bonus based on holistic overall performance? How does comp compare to traditional buyouts / growth equity that is not sourcing model?
How much modeling / traditional PE experience is there within sourcing model firms? Or is it all hitting the phones? 50 - 50, 25 - 75, etc?
Are these firms still mostly 2 and out? Or have they gravitated more towards direct promote for the stars in recent years?
Any general thoughts regarding the value of a traditional associate experience versus that of a sourcing experience.
Thank you all in advance, and have a great evening.
Associate at a similar shop to the ones you flagged (PS, nobody uses “GE” as an abbreviation, just say “growth firm.”) Thoughts:
1) My comp is tied to holistic performance, of which sourcing-based metrics are a part (calls per week, companies brought to pipeline, etc). I would push back on a structure that was overly tied to closed deals since you can do your job in origination perfectly and still not close anything (e.g. deal falls apart in legal)
2) I do about 50% sourcing, 30% DD, 20% misc portfolio ops and investor reporting. But in general our targets are younger, high-growing companies and we do minority investing... so these businesses are much less complex to diligence versus a flat 40-year old manufacturer with multiple business lines where you’re using a ton of debt, there’s a lot of price sensitivity, etc. This is how Insight has 200 companies in the portfolio whereas a comparably sized PE firm probably has 50ish
3) We direct promote, although we lose a little more than half of Analysts to Associates and most of the rest between Associate and VP
4) I think it’s the most valuable thing you can do for a career in growth. Ask any Associate (in any asset class) what the difference between them and their MD and they’ll say something like “He / she has been around longer and seen so many more businesses and situations.” This is the quickest way to get up to speed and learn about a ton of different models and strategies. I know the high schoolers on this board like to talk about modeling as an end-all be-all but it’s a commoditized skill that doesn’t take long to ramp up on (and that you learn anyway!)