Unique situation carry in a 100m fund
I have relatively little PE experience and am recently out of college. I'm joining a firm raising a 100m fund as a person #3, as I have a lot of specific industry knowledge. I am currently paid peanuts in a T2 city until the fund closes (6-9 months). I am also very actively involved in creating the fund docs and will be pitching LPs. I am negotiating comp and we are aligned it will be performance-based. Since I'm joining early and taking a significant cash haircut right now, I am considering asking for 100-200bps carry + 80k base + 50-70% bonus. Since it's rather entrepreneurial and risky (fund may not raise) I think that catches enough upside. Thoughts?
How could you have a ton of specific industry knowledge as a recent graduate?
Without revealing too much, it's quite niche and I've been working in or around it since I was 17
1. There’s no guarantee they will raise $100M
2. 200 bps on $100M fund is $400k if realized at all, will be realized in 3-10 years (investing + harvesting period). Let’s be generous and call it 5. That’s $80k a year of highly at risk comp.
3. you’re really not going to learn anything at a shop like that right out of college that is actually useful. What you really impair is your human capital.
hard pass.
This
Agreed with poster above. Hard pass.
Here’s my 2 cents given I just joined a start up fund. I think any ask above 75bps is pretty aggressive. I’ll be getting 75% of market cash comp and ~100bps depending on the final fund raise number (~$500mm). The only reason they offered carry was to get me to sign on over a UMM (~$25bn) offer I had. I joined from a top banking group with 3 years of experience (including 1yr in MBB). I agree with the other comments that this opportunity is a hard pass, at the beginning of your career you need reps to learn and get good. If this is the only offer you have do this for a year and leverage this experience to get into a good banking group then go to a better PE shop.
No offense but you’re also at the beginning of your career and really not in a much different situation. When I read your comment I thought you’d advocate for it given the highly similar situation until you went ‘hard pass’. Maybe it’d be helpful for OP if you can give some considerations as to why you did join this fund over an UMM as it’ll be as close as anyone can comment on the pros
No offense taken. I really feel that my banking stint helped me get up the m&a learning curve quickly. I don’t think there’s any first time fund that can offer the learning environment a bullpen + associate and VP help did for me. I was able to close several deals while an analyst each of which provided incremental learning opportunities.
A few bullets on why I chose a first time fund over an UMM. It took a lot to get me to choose a start up vs an established fund. OP should consider doing DD around similar points
Way too low. I was in a situation similar to yours (new $80mm fund as person number 3) and got 10% of the total carry pool). Two GPs got the other 90%
Hey may be in a similar position. Can I DM you?
Personally think that’s a reasonable ask or even too little considering the size of the fund. I have a bit less carry on a larger fund. It keeps you aligned.
I’ve also heard 10% of carry pool is standard for a first hire/pseudo-cofounder at a new, unproven fund. 100 bps is wildly low.
Easy pass on this one
Still here, comp kind of in line with the original post. I quite like the job, team's great and my work-life is great. We are early in fundraise but looks like it might get oversubscribed and we are projecting 40+ IRR. Do you think I should renegotiate?
Congrats! Must feel good to see all these stupid replies in hindsight lol. This forum tends to skew in a more risk averse direction which is fair.
If you like everything about it then I’m not sure why you would re negotiate. How much more do you realistically think you could pull in cash terms from yearly negotiation at this point?
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