What is reasonable comp for an Associate at a Fundless Sponsor doing deals at $50m-$500m+ EV?
Found a cool under the radar firm run by a pedigreed founder (Big 3 CO, Wharton/HBS/GSB, top BB, top MF) that's got a pretty wide mandate: equity slugs $30m-$300m+ ($50m-$500m+ EV), minority/majority deals, all kinds of equity/debt structures. Run as a family office setup w/ some other well-known financiers (mostly PE & HF guys) & entrepreneurs backing the investments. Thing is they're technically a fundless sponsor so there's no committed capital/management fees (though when speaking to companies/banks they just say $1b+ fund since there's a discretionary agreement w/ inventors where they can deploy that much in a given year no questions asked), no formalized HR structure, it's literally just an investment team of like 4-5 guys sourcing and executing as a unit.
Should I expect a pay discount to work at a place like this? How much is reasonable to target? The flexibility of the mandate and total lack of bureaucracy seems attractive but the lack of committed fees makes me worry about security. Plus with such a small team and informal structure, I'm not sure what the LT opportunities might look like. The founding GP is easily worth low-mid 9 figs but I'm guessing he's paying the comp out of his own wallet which means he's probably not trying to pay at or above street. My LT goal is to move to a HF and the founding GP is connected with the GPs of multiple top funds in my sector so I feel like even with a paycut doing a good job for him could open some doors.
How would you evaluate an opportunity like this?
My background (4yrs; all sector specific):
-
non-target, >3.0 GPA, 2100+ SAT
-
1yr LMM PE Analyst
-
3yrs CorpDev Associate
- 1yr LMM/MM PE Associate
Never been paid over $100k base which is something I'd like to breach.
You should expect a lower base, but… you should definitely be able to negotiate much higher upside in bonus or other transaction specific incentives. Given there is no management fees due to the structure of the group, it's probably hard for them to commit to a large base salary… however they can definitely get comfortable with ways to compensate through the deals since that is where the money is obviously gonna come into play. I worked at a similar situation a few years back and base was almost nothing while bonus/co-invest/carry opportunities were extremely more attractive than traditional funds.Would love to chat more about this/your background/how you came into this opportunity. Could you dm??
Hey man appreciate the reply. I definitely got the same impression that base will have to take a hit and negotiation on bonus/incentive-tied comp is probably where the real money is. For example, I know that I'm open to fee-free co-invest on anything I source, but they only do 1-2 deals per year so the odds it's something I get get to use it seems unrealistic. Plus not having much of a base to invest with in the first place makes this kind of a pointless carrot. Do you think it's possible to get to a 6-figure base in this situation?
In terms of sharing more about my background - I think it'd be most helpful community wise if you just asked your questions here, happy to answer whatever questions I can and will lyk if there's anything I'm not comfortable going into greater detail on.
Definitely possible. How it was structured for our team (was slightly different because we did Corp Dev for one larger entity affiliated with the group that paid our salaries) was 80k base and 25k bonus per closed deal that we sourced with levered co-invest, carry, and other incentives we negotiated on each deal. This role was out of IB analyst, so your experience is a decent amount more which I think justifies a 100k base. I would just straight up lay out your own package based on your research… something within the lines of 100k base, deal by deal carry on deals you source, and levered co-invest. Here's the downside which you obviously know… the number of deals closed in the fundless sponsor structure is much lower in volume… so while deal carry, co-invest, or deal based bonuses sounds really attractive on paper, you still need to think about the volume of deals this group does… also going into a potential credit crunch. While I was on that team (7 months, left for consulting) I didn't realize one deal bonus as all 5 of my deals were either killed, outbid, or seller got cold feet. That being said… the learning from the experience of leading deals from start to finish was INVALUABLE. Put me years ahead in development of crucial skills needed in PE/investing/working with management of port cos.
I would avoid like the plague. They talk a big game and have pedigree. I did it once and was screwed out of a bonus and half my salary. I know two others who also worked for fundless sponsors and they had awful experiences as well.
They made no money after years. They had success working for a franchise and then no one picks up the phone. I was lied to about dealflow and comp. it’s an awful experience across the board and this is three separate opinions not just myself
Echoing this although limited in my experience working w FS, its basically riding a motorcycle on an industrial highway thats 90% trucks
If you're going to work for a fundless sponsor, might as well just start a fundless sponsor yourself. It's literally just guys looking for deals and then finding the capital afterwards.
You just described PE as a whole minus the securing funds after the fact (which isn't a massive differentiator these days unless it significantly constrains the opportunities available to the GPs), the idea that the learning experience with a pedigreed sponsor vs doing it by yourself would be identical or that you would have remotely comparable access to a universe of deal/funding opportunities is flat out incorrect. If you didn't read the above you're not understanding what the opportunity is. This guy is running XXXm of his own cash plus has complete discretionary decision-making over a ~$1b+ from a close group of LPs.
The capital is not "committed" in a that sense because he is not drawing down any management fees. But because his LPs never deal with J-curve and his carry on the back end can be bigger. They are still looking at high-8 to mid-9 figure EV platforms (+tuck-ins) and 2 of their current investments are some of the best quality LMM/MM assets of scale for their respective verticals (avg. 1-2 platforms/yr for 5+ years now). This isn't some rinky-dink fundless sponsor a couple of frustrated principals who didn't see a path to partner spun out, it's a former sector director from a top MF who led some very notable processes and is now managing his own fortune + deploying money for a bunch of his equally rich friends/close contacts in the industry.
Why wouldn’t LPs experience J-curve? Even if they’re not in a fund, the typical deal economics should still follow an initial period of investment followed by gains through sale? Unless I’m missing something.
avoid fundless sponsors. Go work at an investment bank instead.
You genuinely have no idea what you're talking about.
What you're doing there is not meaningfully different from a Financial Sponsors group at an investment bank.
Similar situation (senior associate) - what is market comp (base + bonus + carry) at an independent sponsor with $150M deployed across a few portfolio companies (standard 2 and 20)? How would that change once a formal fund is raised ($250-$400M)?
I'm in almost that exact spot, send a dm
or just post it here so everyone can benefit... isn't that the point of an anonymous forum?
Sent
Following up again, thanks.
OP I work at a fundless sponsor. Background on me: 1 year audit at grant Thornton. Came in as an associate my base 37.5k, my carry is 96% and my bonus was 20k.
Can confirm
My lord do you live in the US? Where on god's earth is there a finance job that's sub $40k? I've looked at investing jobs in Thailand and Turkey out of boredom and they still at minimum had ~$50k+ bases in a place where the COL was a fraction of what it is in the US. Can't have been particularly impressive GPs if that's the background and pay scale they're working with, no offense. Guessing it was deep LMM?
This is exactly what I’m talking about
Yeah I’m sure this person has 96% carry and $37.5k base you fucking moron
Like others have said: The opportunity sounds good in theory, and you will probably get great experience like OP mentioned, but I see these positions as having a lot of risk for your career and low upside. I was in a very similar position with a very similar offer in a Tier 2 city (Atlanta, Charlotte, Dallas, Austin, etc.). Along with comp structure due to the relative low number of deals, I assume you wouldn’t get the same brand name experience as even a more established LMM firm. That means a lot if you find yourself back in the market for a new job in a few years. And I wouldn’t bank on the head of this firm doing anything for you upfront when youve only met through interviews.If you don’t mind sharing, it would be helpful to know the relative geographic location of the position. If this was in NYC or SF, I’d say for sure pass. Also - how the hell have you not made over 100k base yet with that much experience
Moved to a LCOL state during the corp dev gig which was for a non-US company, made over $100k all-in but my base was closer to $70k-$80k during my time there (technically just below or above 100k when you convert to their currency). First year as an asc at the new PE firm since I was staying in the LCOL area bumped me to $90k-95k base, around $150k all-in. Wanting to be over $100k base is purely symbolic for me since no one in my family has ever made that high a salary.
This sponsor is based in NY/SF but they're a fully remote team, so I can stay in my LCOL state.
Good points on the name recognition, it's certainly something I'm thinking about as another potential risk. Again though I think about how well connected this GP is (he's managing money for founders/GPs from multiple MFs). Maybe I'm being naïve or over confident but I feel good about my odds for making a good impression with him, and if he can give me a very positive recommendation if I were to leave in a few years I'm sure it would go a long ways. Plus I've been thinking about if/when I were to leave my next firm and if I did, I think I would either be moving into a HF or the operators route - not staying in PE.
You current role is a private equity associate, but your base is below six figures? That seems quite odd. What is your current total compensation as an associate?
Given the fact you’ve never broken six figures and you come from an average college, I think this opportunity sounds like a great way for you to fast track your resume pedigree. You get to work closely with a proven senior and if you do a great job for him, you said he’s very well connected and could probably help you land somewhere great after a few years.
In terms of negotiating comp, triangulate a number based on your current comp, average pay for a PE associate at an UMM firm and comp from one of your friends at a HF.
I think it would be appropriate to certainly ask for a 150k base given you have 4 years of experience. I would be very cagey with your current comp given it’s so low.
In terms of how much carry or deal bonus to negotiate, I defer to other posters. But this opportunity sounds so cool, I wouldn’t let comp be your sole motivating factor in deciding on this opportunity, especially since your already low.
Tier 2 LCOL city + assuming it's deep LMM and a small firm, I've seen <$100k before. Often guys like this who don't have a blue blood or banking pedigree and are trying to get a foothold
I'm in almost that exact spot, send a dm
Listen, you don't want this job. No one was ever happy they went to a fundless sponsor. That shouldn't even be a real job, it should be illegal along with Teach for America and unpaid internships. Ask for $300k cash comp like the rest of the mid market PE associates.
For a firm doing deals that size I would think around $180k to $220k base. You’re definitely underpaid right now btw - make sure you leave ASAP.
$180k-$220k base for an associate at a MM independent sponsor? Sounds like a pipedream… committed capital funds writing those kind of equity checks are more like $125-$150k base
I am in the same situation that you are in.
LCOL fundless sponsor. Good pedigree of founders.
I work 9-6
Make a little under 200k 100k base 50k/deal bonus min 100k bonus if we don't close a deal, uncapped if we close 2+ deals (unlikely)
Deal bonus is co-invested. All platforms currently owned are performing extremely well
Good experience so far, but I do feel a little under compensated
That would be a great step up for me. By LCOL FS did you mean you live in a LCOL city? And how many years of experience?
4 yrs and yes Tier 2-3 city
Have done similar work and know other people who have, we all went back into bigger banks/more established firms after a bit as you really do get screwed on comp. Base is always shit and upside is never what you hope for. They will also find a million ways to delay paying you the upside:
“Oh sure the deal closed but we haven’t exited yet”
“Oh right yeah we did just get a huge pile of cash but we’re actually investing it in getting a new office/building a bigger team/whatever and aren’t you excited to be part of a growing business?”
“Yeah we did promise a huge bonus but instead I took the team to my ski chalet for a few days in Feb, how many other analysts get to say that?!”
Was it difficult to recruit back into banking / move into an actual PE firm with committed capital?
I am assuming you are really limited to LMM and maybe MM firms?
Not really but we mostly had ok CVs beforehand.
There is a ton of bad information in this thread. If you are joining an independent sponsor here's what you should care about (generally, not just OP):
1. is this in preparation of launching a fund raise? Many independent sponsors are former lead partners at larger funds that leave to start their own fund for a variety of reasons. In preparation of becoming an emerging manager (first time fund raise), it is common to build your own track record by doing a handful of deals on an independent basis. These investments demonstrate your ability to source deals, execute deals, etc. It de-risks your initial fund raise. Even if you have attribution at your prior firm, it helps to build your own track record in this way. These initial investments can even be rolled into the first fund. Note: there are a ton of LPs out there that have pools of capital to do co-investments, which is essentially how independent sponsors structure deals.
2. related to above, what is the pedigree of the founding partners. Were they mid-levels at their prior fund (red flag) or lead partners of a specific vertical in a larger generalist fund
3. have the founding partners engaged or are they in the process of engaging a placement agent and what is the target amount for the first fund. Per your initial question about compensation, you should use the target fund size as your benchmark for comp. No you should not take a discount.
4. have the founding partners engaged or hired third-party resources necessary to operate a fund - accounting, CRM, legal, etc.
5. do they have relationships with LPs - family offices, fund of funds, pension funds - all the usual sources
If they check all the boxes above, you're in a good spot. Like anything, this model has its trade offs. On the plus side, carry is not cross-collateralized and you don't have to initially worry about the euro waterfall structure that is becoming more typical for emerging funds. Carry should also be more accessible given the risk/reward profile.
I interned at an independent sponsor for a while while pursuing my MBA. I learned a shit ton but can echo some of the negative comments above. Def a trade off - I wouldn’t touch it unless you don’t have other options
Nisi quos iure error sed quam. Aut rerum deleniti consectetur eveniet. Veritatis id quae totam iste vero voluptatem asperiores. Vitae quis commodi quia nostrum.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
At delectus facere ipsum. Quis voluptas architecto in dolorem quod. Ullam ad rem dolore. Adipisci autem doloribus veniam sint distinctio. Earum id illo deserunt quia ad consequuntur voluptatem. Autem omnis similique aut nisi eos et. Consequuntur repellat dignissimos nemo sed aut et aut laborum.
Excepturi accusantium quisquam optio rerum reprehenderit. Aperiam iure aut inventore numquam quisquam architecto est corporis. Vero sit nobis vel autem necessitatibus enim. Labore voluptates molestias odio sapiente itaque eligendi nobis. Aliquid est deserunt et nihil voluptatum minus sed voluptate.
Sint accusantium asperiores quod quis voluptatibus quia et non. Soluta at qui fuga minus reiciendis omnis repudiandae veritatis.