Join startup fund or continue recruiting?
Hi all,
I am currently finishing up my MBA and have the option to join a $30M PE fund as the second employee. Founder is a previous MD of mine, and I would be curious if anyone else would take an opportunity like this. Money is already raised, he has a good track record, and I would be able to get carry.
The other option is that I continue recruiting. I have gotten significant interest from some VC firms as my internship was with a VC/PE shop with a good reputation (Have a tentative return offer). My thought process is that I should continue to spend my 20s building brand names on my resume before doing something like this.
Appreciate any insights! I really love the idea of starting my own business, and the MD is a great guy. Just want to make sure I am not missing anything glaringly obvious.
Bump for other people to opine, but if you are incentivized by the carry, would that mean you are locking yourself in because you wouldn't want to find a new job until you realized some upside in your carry (assuming that's ~5 years later?)
Absolutely, but I think the carry I would want would lead to a material payout even if it wasn’t an absolute rocker of a fund. Conversely, I feel that if I structure my base to be pretty good I wouldn’t be too remiss if a solid opportunity came up.
$30M? Are you missing a zero? No hate for the LMM because I’ve seen small funds that crush it in microcap deals and don’t want to get any larger, but those were like $100-$200M.
With $30M, assuming 2-and-20 (big assumption), the annual fees are $600k… after rent, compliance, accounting, etc. I’m not sure you could even pay salaries, let alone deal fees (and dead deal fees will eat your LP’s returns alive if you’re passing them through).
I’ve seen the $30M fund work in precisely one scenario, where they treated it like a semi-funded independent sponsor and raised 80%+ co-invest for every deal but could always tell founders they had “certainty to close” because of their committed fund and could tell co-investors they had their own skin in the game.
In any case, at this stage of your career unless he’s giving you founder equity (25%+ of the GP), I would say definitely not worth the tradeoff to join a fund this small
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