Start-up or PE
Hey everyone,
Wanted to hear thoughts on joining a very early stage startup (5-10 employees) or pursuing PE associate role. Priority for me is money. Thoughts?
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depends how risk averse you are and the startup’s potential. no one is going to be able to answer this with zero information on the startup’s funding, your comp, etc
How much equity are you getting? Since you’re recruiting for PE as well, I don’t think it would be too hard for you to model what your stake would be worth at various exit values (keeping in mind you will be diluted by fundraising along the way)
In general the PE comp will have a much higher floor, and likely a higher ceiling unless you’ve joined a future unicorn. Keep in mind there’s only like 10-20 companies per year that exit at a >$1B valuation so more likely than not this startup ain’t it
To echo everyone else, it is up to your tolerance for risk.
Kid in the analyst class above mine was debating the same thing last year. Ended up picking the start-up over a more traditional PE offer. He received some amazing stock options, etc. in his first 9 months, but COVID hit, he got laid-off, and the start-up is on the brink of bankruptcy. Doubt many PE associates are in a similar position at the moment, but then again, this is just one isolated story. I'm sure others have had way better experiences.
Bear in mind, it is the startup. As long as you can take high risk, it is potentially the most effective place to make huge cash. It is like investing in one junk bond without having a portfolio. If you have enough money to live through 3+ years at least, startup with high potential is a way to go.
Chances of you landing a meaningful PE gig vs a meaningful startup job is not even comparable. If you have the confidence go the startup route. the pe firms will beg for you down the road but make sur you focus on the financing side of things. and don't pick a shitty startup.
I would be keen to know your thoughts as to why you think PE funds would be interested with someone who worked at a startup. I would totally understand if we are talking about VC fund, no sure about the PE. Can you elaborate more on your thinking?
Agreed, we’d never hire someone from a startup for an investing role.
If they were a junior employee that grew alongside the company and was around for a while post-acquisition (under the sponsor), we’d probably consider them for an operations role. If they were a founder or C-Suite and had a super successful exit we might consider them for an operating partner / senior advisor type role, but outside of VC or using your own money to start a fund it’s pretty rare to see operators end up in investing seats
All depends on risk tolerance - PE is a grind but essentially guaranteed >$200K salary by the time you're 26 (my age).
Buddy of mine joined a series B that grew 500x in three years and his options are worth just under 7 figures, working 40 hrs/week.
Another buddy of mine started his own tech company - got beat to market by another competitor after working on it for 2 years. Now back to square one.
Have you considered a start-up PE shop?
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