Stay at MM boutique PE firm or take the offer from a PE MF?

For some context, I've been interning with this startup PE firm for a couple years and I'm slated to work with them full time once I graduate here in a few months. I was one of the first junior employees to be brought on and it's been a really neat experience to work directly with the partners who have been building the firm for the last couple years. Overall, the culture that has been built is one I really enjoy but my main worry is instability. We currently only have a few deals done so far, and because of this, there is no guarantee the firm will succeed in the long term and I will be getting paid slightly under market as an analyst in nyc. It's not by a large amount but with the prices of rent and everything else in nyc lately, it definitely has me a bit worried. The nice thing is though, I will be given one or two points of equity that will vest over a few years if I stay on for full time.

On the other hand, some of my earlier networking has come around to pay off and I've unexpectedly been given a handshake offer to work at a MF. Short term this seems like an amazing opportunity to make great money and have a place like that on my resume (I'm a tad worried about having to find another job one day with only this start up MM PE firm on my resume).

In summary, I'm curious what you all think about this situation and if it's worth taking some risk now at an early age to work for a place that I enjoy being at and could potentially pay off really well in the long run; or if I should take the chance to build a solid foundation on my resume at the MF? Certainly not complaining about the situation, but it's something I've been going back and forth on for the last month or so.

Thanks in advance!

 

1-2 equity points aka 100 to 200 bps. Yes it is a very generous amount which is why it would be difficult to pass up. They’ve liked me working with them for the past couple years and have made one off comments about me potentially being partner one day.

 

This is the time when you have to decide if you want to be risk averse and take the safe path or take a risk, have fun and potentially make a boat load of money at a young age.

Personally, I have always taken the safe path and realized it’s boring af after sometime. Taking a risk, building something and being part of something that you actually enjoy is way better imo. Anyways, either way you will have a great career with both options, so don’t stress yourself too much

 

What do you mean by "we only have a few deals done so far"? Is the firm having a hard time deploying capital? Because at the end of the day while it is important to deploy capital (afterall generally you want to deploy most of the funds within 5 years) if those 'few deals' are on trajectory to be home run deals (5x+ MOIC) then I'd argue the pace and history of the firm doesn't matter.

Also assuming its at least a $100m+ shop (though generally MM shops are $300m+ fund) 100-200bps is great 

 

Trying to keep this general to remain anon but because of the lack of track record, we have been doing funding on a deal by deal basis so I would be receiving equity in the parent company of all deals. So far we have 4 co's under management each with an EV in the $70-$100M range.

 
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Do the partners have a real history of generating returns? Have they done a job of exiting? Do they have a penchant for developing junior talent? Can they actually raise real capital and create a real fund?

Look, it’s not easy to buy a business but I’d argue that it’s way harder to sell one and even harder than selling is to actually make money on it. You’ve got to make sure that your team has actually done this before (even if only as a principal at another MM fund).  Same goes for fund raising, maybe they’re well connected but without a legit track record, that could end up being a grind with limited line of sight to success. And then there’s career development - you’re young and it’s great that they want to invest in you, that a really good sign, but have they minted good principals/jr partners in the past? When did they start working with them? It’s different than taking an associate who has a couple years of IB polish and growing them vs a kid straight out of school.

If they’ve dabbled here and there and they’re just rich guys giving it a go then having the back stop of a MF for the first few years of your career seems like an awesome start and you’ll get the requisite training you’ll need. You can always go back but you won’t be able to go up (outside of 2 sigma type events). But if these guys are legit then ya, 100-200 bps on 2x fund, even if only $150mm in equity is an extremely good outcome (as long as the pref doesn’t kill you)

 

I appreciate you bringing up these important points to consider. As far as personal track records, yes they all have a background in IB/PE and ranged from the VP to Partner level at other firms. We’ve brought on some younger people who were actually responsible in the past for training interns which is nice but the partners have done the same in their career as well. Also, none of them are exceptionally wealthy by any means at this point in time and have actually put quite a bit of their own money into this venture over the past few years. With all this mind, I find it somewhat comforting that they’ve all done this type of work before and we’ve marketed their experience for a reason. I’ll probably end up staying for at least a couple more years so hopefully it all works out.

 

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