UMM PE vs Startup
Hey guys,
I’m currently working in MM IB and have two compelling offers: UMM PE (AEA/Audax/Berkshire/Centerbridge/Charlesbank/Golden Gate/GTCR/NMC/THL) or a startup backed by a16z and Accel (where I would be an early employee with equity). These are obviously two very different paths so was curious to hear peoples thoughts on the pros and cons of each / any general advice.
Thanks in advance 🙌
Some UMM on your list are better than others (i.e., NMC/Berkshire > AEA) but broadly I would probably take the UMM PE offer. Two ways to look at it I) risk/return and ii) upside/downside. Most people on this forum after consideration of (i) and (ii) will take the UMM offer given the risk-averse nature of many of the individuals here (including myself)
After your stint at a UMM PE you should be able to get in at a startup with a higher title (hence more equity) given your PE experience as in you could probably swing a sr. manager/director position whereas as an analyst coming out of IB you would generally only be getting associate titles (mileage and personal experience will vary depending on the size of the startup).
The only real downside of choosing UMM PE may be that the startup that you skip takes off and becomes the next FB/Google/Stripe (or whatever multi-billion dollar unicorn) and you lose out on millions of dollars of potential equity (oh and grueling long hours of PE). However, if you really had such conviction about the start-up you wouldn't be asking whether or not you should be taking the UMM offer in the first place. Also, doesn't matter if they're backed by a16z and Accel, that doesn't guarantee the startup will have success
That is super helpful, thank you. I will say that the startup is crushing it and has been in the top charts on the App Store for a few months. In fact, I’d bet that 50% of the kids on this forum (18-22 year olds) have it and that 95% have heard of it. The startup also has an amazing mission that I believe in. Just hard to make that risky of a jump because I always envisioned myself to stay the safe route.
Within the age range you specified and the company sounds like BeReal (half kidding since you mentioned you really support the mission and this is a fun photo social media app). Happened to just notice it’s popularity in my age group and how it’s backed by the two funds you mentioned earlier.
Also, how would you rank the list of UMM PE firms that I included? Thanks in advance 🙏
Hard to rank definitively but out of the list as mentioned I would probably take Berkshire/NMC over anything else and then THL.
I consider Audax/Charlesbank more MM (though very well known funds of course). Don't know much about AEA/Centerbridge. Personally would not touch Golden Gate/Audax.
I would take the startup if you have high conviction, you’re getting a good role in it, you really like the team, and you’re getting meaningful equity.
Agree with the post above - now consider the equity you are getting and the valuation you are getting it at… it’s likely underwater anyways. In 1-2 years time you’ll be able to join startups with equity where the valuation is reasonable and therefore your equity is worth something.
Look at some press articles around down rounds for some of the hottest startups out there or raising debt as an alternative given that the valuation would fall from a cliff.
nothing else to add but just something to consider that I wanted to put on your radar.
Like others have said, that’s a pretty broad list of PE firms in terms of both reputation and quality of life (there’s not enough money in the world for me to work at Audax).
Also really depends on the equity offer from the startup. Did they already raise a $100M round at a massive valuation? If so, hard to value the equity as worth a lot, and even harder to see a really massive upside. If the equity is offered to you at a $10M valuation, it’s a lot more possible to end up as a life changing sum (though earlier stage also means higher chance of going to 0). Look at some stories now of employees at really flashy startups (who often are backed by top VCs). Plenty of companies raising down rounds making equity grants worthless.
Thanks, this is super helpful. How would you rank the PE firms?
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