Turn/River Capital - 2024 Updates
Wondering if there are any updated views on Turn/River Capital, especially with regards to associate comp / recent returns / culture / upward mobility. I can share some of my understanding here, but would appreciate any thoughts or feedback.
From my understanding, they primarily do software buyouts, taking a similar approach to TA Associates / AKKR where they seek majority/control positions in bootstrapped B2B software companies. They also occasionally delve into more complex situations like take-privates and carve-outs. Have heard that their analyst program is sourcing-focused, but the associate role is execution-focused for those that came out of banking.
Their historical returns were amazing with many 4x+ MOIC funds, which allowed them to triple their fund size every 2-3 years leading to their $1.35bn Fund V. Not saying they will become the next Thoma Bravo, but people often forget that Thoma raised their Fund V back in 2012 at $1.25bn and soon after went on a trajectory that eventually got them to their MF status today. Understand the software PE landscape is different now compared to a decade ago, but does Turn/River have the potential to become the next Thoma/Vista? Their ability to do take-privates (ex. Tufin) seems to be a good sign for their scaling potential.
Overall, they seem like a place with great upside potential, assuming their returns continue to hold up well, but happy to hear any thoughts here.
Here are some specific questions:
1. How is the comp at the associate level and beyond? Have seen that their analyst base pay is at $120k+, which is a good sign, but curious what comp look like at the associate+ levels. Do they offer carry?
2. How has the return been for their most recent $1.35bn Fund V? How much will they likely to target for their next fund raise?
3. How easy/hard is it to be promoted to VP+?
4. How would your exit options look like after a 2-year associate stint with them?
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Personally I’d rather bet on Preflop Capital
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Latest fund is deeply underwater and might not be able to raise another fund according to someone who recently left the firm.
They overpaid for assets between 2020-22 and have been unable to exit a few assets that they've held for more than 5+ years now.
A good example of a software growth equity firm that rode the SaaS multiple expansion wave in the mid to late 2010s and is now getting punished.
The associate and analyst roles are almost 100% sourcing (cold-calling) with very little diligence and execution work, even though they seem to advertise the opposite when they're hiring. Wouldn't recommend their program if you want to learn how to think like an investor, and you won't build many transferrable skill sets after your analyst / associate stint.
WLB is good however, and they pay well below market. Many people on their investment team also came from "non-traditional" backgrounds (non-BB/EB IB), which explains the subpar pay.
Heard somewhat the opposite actually, didn’t they just do a big exit? Saw a press release for 2.5 billion, EV larger than their latest fund size total which is probably a good sign for future fundraising even if its from an older fund.
Seems like they advertise their analyst role as purely sourcing (which is in line with analyst roles at other growth firms, summit, akkr), but if they’re doing take privates and carve-outs it’s hard to imagine the associates don’t do a decent amount of diligence, even if they source too. My guess would be it’s like TA where associates do both and flex that mixshift up and down depending on how busy they get. Also seems like their associates recently do come from traditional backgrounds, but not sure if that’s just a product of scaling.
Echoing what the VP in M&A above said, they have been getting reckless the past few years with pricing compared to the rigid process they'd been running with previous funds. As they've grown their fund size they seem to have fallen into the trap of deploying bigger checks into big deals outside their core competencies that, because of the mania in 2020-2022, they could quickly mark up in reports to LPs. They don't seem well adjusted to operating at the scale they've managed to achieve, and while that could certainly change and I don't think they're as fucked as funds like Clearlake might be, they're definitely in for a challenge the next few years when they have to try and monetize some of the bigger deals they've done. I can speak first hand about them playing it loose in recent years after experiencing them outbidding my fund at a STUPID valuation on an asset which we were already getting into nosebleed territory with. A couple bankers I've talked with who were aware of the process also admitted they were surprised it got as high as it did.
They're definitely not going to be the next Vista/Thoma, but they're a solid fund in terms of historical performance and if they can weather their less-than-stellar decision making with their latest investments I think they'll do just fine. The next 3-5 years will be pretty definitive.
Hmmm what do you think are their core competencies? Just wanted to get a read on that
Did well investing in boring horizontal legacy saas platforms. Played out strategy, not doing well and I say that knowing several associates who left within the last 2-3 years. Also hours/WLB are prob good but pay is meaningfully below market for GE, and they are super libtard/woke type people there
Can you DM me? I think I saw they just bought a cloud IT company for couple billion too
Grew AUM too much - not able to deliver attractive deals and returns with latest fund size. Echo on above - also heard latest fund under water (see all the exits from mid levels as a sign)
After all the sturm und drang above, they just closed a new fund at a hard cap that doubled the previous ones lol
saw their aso base is 260k?
Yep that’s what I heard as well
Their first funds have been small but performed incredibly well (5x+ MOIC), due to some outlier exits over the past several years. Associate comp is $280k base + $100k bonus. TBD how their very heavy go-to-market operational strategy scales with this new fund
Associates are getting $280k base and $380k all in? This is MF comp for such a small firm
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