Comparing Offers: Megafund Associate versus Startup VP

berliner's picture
Rank: Senior Chimp | 23

Hi everyone,

Any thoughts on the pros and cons of the following situation would be great!

I am an ex-management consultant (3 years) with Ivy-league MBA and one year of IB experience and I was fortunate to receive an offer for an Associate position in a $1bn fund of a very well-known mega PE shop and an offer for a VP position in a recently closed fund (ca. $500mm) of a new PE shop.

Investment strategies of these shops are similar in terms of size, sector, region, control requirements etc.

Teams are of same size (5-10 people) and the MDs have similar investing experience and success (15-20 years and 20% IRR)

In the mega-shop, I will be the most junior person in the fund, whereas in the startup fund, there will be two analysts below my level.

As per compensation, the mega-fund has not confirmed the base&bonus yet but there won't be any carry before promotion to VP (no less than 3 yrs). The startup fund offers $400k plus 120bps (vesting in 5 yrs).

Although I will not give my decision solely based on money, the startup fund's offer is quite exciting and I wonder what my chances will be in terms of base+bonus+carry in the mega-fund if we look at 5 years down the road...

Also, how important would it be to work at a mega-fund if I would happen to raise my own fund in the future? Does brand name matter more than your fund performance?

Many thanks!

Comments (17)

May 12, 2011

Lol at $1B fund being called megafund.

Listen dude, don't flatter yourself. Megafunds are like $30B. A $1B is more like a middle market.

Aug 18, 2014

redacted

May 12, 2011

I would personally go with the startup but thats the entrepreneur inside of me speaking.

Honestly though, great job on both. Must not have been an easy feat.

May 12, 2011

don't megafunds have multiple funds even for capital raised in the same vintage year?

i.e. they can set aside $1b of the aggregate fund for a smaller special situations fund targeted at something like South American petroleum intermediaries

May 12, 2011

Interesting career path...

3 years consulting --> top MBA --> 1 year IBD --> PE

Same # of years as the typical IBD --> PE --> MBA --> PE route, but you got to substitute consulting for a year IBD and 2 years of PE. Did you find that PE firms liked how you had both a strong management consulting background as well as investment banking experience?

The startup seems to be offering a huge amount of money which I found find hard to pass up if I were in your shoes. KKR has been known to pay at least as much though - $1 M in 2 years out of MBA.

May 12, 2011

Yes. OP said a $1B fund at a megafund. Please read carefully there "The Shit". Personally, I would go with the smaller fund. You will have people below you to hand the bitch work down to, and 400k is nothing to laugh at. 120bps of carry on a 500mm fund is around $1.2mm (assuming 2/20 structure, 2x money multiple) and you will probably have a lot more of an ability to move up quickly in the smaller shop. If you want to start your own place, maybe having a big name on the resume will help, but at the same time in 10 years you could be very senior at this shop.

May 12, 2011

If your ultimate goal is raising your own fund, I would try to understand what it takes to do so. A great person to shoot a message to would be someone at a FOF who specifically invests in MM PE. A conversation with them will (1) help you build a rapport with someone who may fund you in the future (2) help you understand the backgrounds of individuals they are funding. Surely your MBA network can point you in the direction of someone you can trust to bounce ideas off of.

The monetary aspects IMO are much unclear @ this point to comment on, but Billy Ray's framework is probably in the ballpark. Then again your consideration of the startup's partners' track record vs. mega's track record, and how you think plays into each funds' expected returns, as well as your own outlook on each funds' industry focus and expectation of the exit environment in 5-6 yrs -- def. something to think about.

I think one big consideration is the type of role you will honestly have at the mega, which will undoubtedly provide you with a top name on your resume, but if at the end of the day you are purely the excel jockey then how will that play into your ability to raise capital? (this should be a big part of your necessary conversation with an FOF person before you execute the offer). Given the mega partners' track record, and what seems to be a top-heavy hierarchy (you "will be the most junior person in the fund"), I highly doubt you'll obtain Board Seats and wont have an ability to showcase that you drove portco performance/returns and led an exit. Then again you have no buyside/equity investing experience, and may "need" to pay your dues - an FOF will have an opinion on this as well...All of these considerations might be importance when you are promoting your bio during your own fund's capital raising process.

May 12, 2011

I would think one of the bigger considerations would be upward mobility. I would assume at the megafund that there may be issues promoting people to partner, i.e. the current partners are unwilling to share the pie. At the startup, you may find that you would have more flexibility and opportunity to move up. If you want to raise your own fund, what is the context? I.e. do you want to raise a fund to do one deal and go from there or are you looking to raise institutional money? Does being a partner a firm that raises a new fund meet that criteria or are you wanting to do it on your own, which would require you to have other partners most likely? Just some food for thought.

May 12, 2011
goalieman688:

I would think one of the bigger considerations would be upward mobility. I would assume at the megafund that there may be issues promoting people to partner, i.e. the current partners are unwilling to share the pie. At the startup, you may find that you would have more flexibility and opportunity to move up.

This.

May 12, 2011

def the vp spot. you have someone to hand down your bitch work to and you have less of the hierarchy in a smaller fund. In the end of the day, you might not have the name, but you will have the dough and the VP title in a PE fund, which is what really matters

May 12, 2011

Those are great offers considering you didnt have preMBA PE experience. Howd you land them and where did you go to undergrad/what were your grades? Did you have industry experience?

May 12, 2011

Just five monkey shits? Suckas

May 12, 2011

lol @ someone asking him his undergrad grades

May 14, 2011

I'd go for the VP role, not a particularly tricky promotion route to principal, from where launching your own Fund or getting into partnership would not be too difficult.

At the megafund you will just be another (albeit well compensated) monkey, with no cut of the carry....if the MM is a decent fund that can return c2.2-3x you're looking at a very decent payday.

If you want an LP perspective of the two Funds, feel free to pm me names and I should be able to offer a few thoughts, assuming I know the MM.

May 14, 2011

Waow - I was not expecting so many differing and valuable insights. Thanks all

@ The Shit: It's a fund of a mega-fund. I am not aware of any specific $30bn fund that is not under the umbrella of a larger organization (maybe SWFs...)

@ Schwarzmanegger: Both funds liked the fact that I had both consulting and IB (although it is only a year) experience. Not sure whether that was the differentiating factor though...

@ Billy Ray, DurbanDiMangus, goalieman688: Valuable aspects...

@ bIastoise: It's been quite some time since someone asked me my undergrad degree :) For your reference, I don't have an ivy-league undergrad, but career-wise I had a consistently good track record at my employers and a balanced resume if that's what you are asking...

May 14, 2011

I am no expert so I can't give you any advice.

just want to say congrads though! all those offers sound terrific, especially in this economy. Goodluck!

May 17, 2011
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