Advice needed! Taking risk moving to a small firm
Would really appreciate some advices on the below from the WSO RE squad!
Background: analyst at global PERE 50 firm in acquisitions (2.5 years exp). Been looking to make a move to more of a niche/product type I have no experience in for quite some time - no luck (I'm focused on one asset class). A small firm, doing exactly what I want to do, has told me that we could work something out where I join with no salary and can get paid on a deal by deal basis in fees/equity. Essentially just "figure it out as we go" type of deal...Disclaimer: I would go into this opportunity expecting to get paid $0. Goal is to learn, meet cool people in the space I want to be in long term, have a chiller job for a while, study for GMAT. Am I crazy to consider this?
For context: I have about $100k in savings and my parents can help me out a bit if I need it while starting this new opportunity. I absolutely love the company, the founder is incredibly well connected in the space I want to end up in, and this job would be a lot chiller than my current GIG. I plan on going to B school, so I can also use this time to study for + crush the GMAT, travel, and learn about what I'm actually passionate about. Who knows maybe I make some decent cash along the way.
The plan would be work at this firm for 1-2 years then apply to b school.
My thoughts/questions
- Is it stupid to give up my seat right now, during a pandemic, to pursue something I am actually passionate about?
- Will it hurt my chances at M7 schools moving from a well known firm to a smaller / less known firm? Undergrad = non target but strong 3.9 GPA
- Anyone make a similar move? Any regrets?
I think it would be a fun year or two to take things a bit easier, study for the GMAT, maybe travel a bit, and learn about an area of RE that I want to pursue long term while meeting some awesome people. Plan is do this 1-2 years -> B school/grad school then reassess. So yeah - is this just wishful thinking / a dumb idea right now?
People will think you were about to get fired. Also, a place that cannot afford to pay you a salary is not a great place to start or end up.
Also don't move until you are a VP, MAYBE an associate. And then, always go one step higher e.g. you are an associate in a MegaFund, then you should be a VP anywhere else.
hmm, this is an interesting one... my thoughts/answer to your Qs
1. Is it stupid? It's unorthodox to say the least, if you do this, don't expect an easy move back to REPE or other institutional role. Not impossible, but will be going off track at an early age and big institutions like people who fit the roles at the lower level. If you were mid-senior, totally different, just 2.5 years becomes a minor "who cares" stint really fast, esp if you leave with the analyst title. If you hate the big firm REPE world, and really want to go startup life, then consider it. But I think this should be viewed a major move, not just a shifting of jobs.
2. Doubt admissions teams will really care that much, good essays can explain it (heck it could help you potentially), they really don't know firm names that much in all reality. GMAT matters more. Bigger question, if you want to go this route... why go back for M7 MBA at all? What's the end game? Or are you thinking this as the backup/failure plan? If you found a dream job (more on this later), then why go get a MBA or a top one at that, just do part-time if anything.
3. Can't personally address, but I did start with small, no-name boutique shop and ultimately leveraged up to large, multi-national shop. CRE allows for moves up and down in size and scale, better than other industries, so not as crazy relatively. If the experience you gain is legit (and you have success), then you can translate that to better or other job if needed.
Other points on the situation overall...
4. The unpaid fact makes me think you should say no, if they can't afford to pay you, then I question the probability of success. I guess you could get equity or the pay as you go fee/model, but that doesn't fix the fact that they are not willing or able to pay you, a bad sign overall.
5. Dream jobs that get offered to people at 2.5 yrs of experience are always of mixed quality. Not to offend, but few people at your stage of the game will get offered roles to be lynchpin/key players in a new or small venture. You might get this after a number of years, when your bio is really worthwhile to the firm, but at a junior level it doesn't translate.
Honestly, whether you should take this is deeply personal, if you feel so strongly, and believe in the firm, I guess not totally crazy. Just feel like you have to accept the reality that getting back to a PERE 50 type firm could be a very tall order. I would feel much better if you had a legit base + ups structure.
Big red flag that they can’t afford to pay you even a modest salary. What you’re gonna wanna do is turn 180 degrees and run.
To take a slightly opposing tact of what others have said... just because they can't pay you doesn't mean it's not a good opportunity. But to echo some recent threads on this forum, you need to be getting serious carry. Not a couple hundred bps, like statistically meaningful amounts. Either that, or the majority of the fees that come in. Again, nothing wrong on working on commission, essentially, but you really don't want to end up in a spot where you're busting your ass and bringing in major deals for them, and ending up getting paid what their salaried PMs make. You're taking a risk that they aren't, and should be compensated accordingly. Certainly not in a "make it up as we go" sense, because these guys will agree to anything on a handshake and yank it back the first time you bring in a lucrative deal. Tell them you want to sort out the compensation arrangement up front in writing, or that they can pay you like anyone else. But I wouldn't walk away from the opportunity solely because they don't want to put you on payroll. Can be a lot of reasons for that which have little to nothing to do with the financial health of the firm.
I'd question the judgement of a firm willing to pay so much more just to save on salary, if they can't capitalize enough to pay the team, promising above market pay for exchange of risk seems like a bad business move (i.e. way more costly long-term). Why would anyone want to do this, there is no reason, except undercapitalization.
Sure, but any entrepreneurial small firm is going to be in that situation. It may not even be reflective of their long term prospects - if you are just starting up and you've got a development pipeline, you have real costs coming down the pike and presumably not a ton of working capital to cover pre-dev costs. In such an instance, it might make a lot of sense to bring someone on to help the workload and prep for the future, but also conserve scarce capital resources.
I work for a smaller developer, and was there early enough to remember the fundraising issues. Finding money for a deal is easy, because it's easy to map out returns (or at least potential returns). But raising operating capital is extraordinarily expensive. It's the most at-risk and there is no easy source of payback for it. Founders are obviously unwilling to give up huge slices of their own company for a couple hundred thousand dollars, but investors don't want to just give away equity that essentially sits in a first loss position - if a deal goes bust there is some residual value to the land. Not so the money you paid so that the Sponsors can cover overhead.
One easy way to square that circle to drastically curtail your overhead. And what's the single biggest expense? Payroll. Don't pay salary and benefits, pay a piece of future upside, especially at first. You can always renegotiate with your employee at a later date, where you certainly won't be able to change the terms of your operating agreement if you have an institutional or seed partner. Owning a piece of the actual operating entity (and thus any subsidiary LLCs that get formed) is FAR more valuable that owning 5% of the individual deals that come in, and as I said, far easier to buy/negotiate someone out of
I’m not saying you should do it, just saying that the best time to take risks in your career is when you’re young. Or maybe when you’re close to retirement and already wealthy. Just don’t waste the opportunity. Travel and study but also actively pursue deals to work on and learn as much as you can. Just make sure to get your pay structure in writing and have an attorney review everything you sign. Who knows, maybe one day when you’re sitting in class at your M7 mba program you get an email from your old boss saying he sold one of your deals and you need to stop by and collect your 6 figure check.
I have to make a counter argument here, at least with respect to "risks" meaning go entrepreneurial (which is what I think is implied). Unless you are sufficiently skilled, networked, and resourced (all things not likely to be true a few years into a highly complex business like real estate), you are in a very poor spot to take risks. Most successful risk takers (again, in the entrepreneurial sense) I know personally, left the "big name" job from late 30s to mid/late 40s. Clearly, there are success stories of people striking out in late 20s or practically anything, but those are far more rare/unique (and often from decades ago when real estate was far less established and institutionalized).
You need to learn the business first, get your skills perfected (I'm talking management/sales/negotiations, not BS excel modeling stuff), and have an established network that actually knows/trusts/believes in you (like enough to send you business or invest in your venture). I hate to point out the obvious, but those people rarely have the title analyst or associate.
That's my main point for the OP, they will probably get far better opportunities to do cool shit later on. This seems like swinging at the first pitch.
This is a huge no from me.
Your plan is to make potentially $0 for 1-2 years and THEN go to grad school? (Where you're going to be taking on debt because you already blew through your savings?)
...why?
agreed - that's a big red flag
re-reading the OP, it doesn't sound like the OP gives a FUCK about a salary and he likes this founder. i say go for it. people are acting like these things pop up in your inbox every day but they don't. i can tell you from experience.
OP, what do you expect ... this is wso. of course they'll tell you not to do it.
and then... skip bschool while you're at it.
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