Downsides of PE VP Roles

Hi Everyone, 

Posting this from a burner account for identification purposes.

A bit of background

I am coming to the end of my first associate year at a reputable MM PE firm. Recently, my firm offered me a third year as an associate, with the potential to come back post-business school as a VP to the extent that the firm is hiring. The VP role would also put me on a partner track. While the VP spot is not guaranteed, the firm has experienced really rapid growth since inception ~15-20 years ago and I was told that a VP spot would be 90%+ certain if I did three years as an associate and then business school. Further, in the 2nd half of my 3rd year, they would notify me if the spot would be available, so I can hit the ground running in business school if I need to recruit. 

My current thinking

I can leave to go to business school in 2 years, if I wanted to, but given the potential to skip the VP recruiting cycle, the idea is very attractive to do 3 years as an associate and just come back after a b-school stint. That being said, I do not love my current role. While I have closed a platform already, and am close to wrapping up a second in the next 2-3 weeks, the past year has been a bit of a let-down in terms of expectations. That being said, I have never been in the shoes of a VP, and want to gather more information about the role itself. While I know the day-to-day and deal-related tasks, what do most VPs struggle with, especially at larger MM shops? What are the worst parts of the role and for those of you that have committed for the long term, what outside aspects of intellectual fulfillment (and probably money) convinced you to do so?

For context

If I ultimately choose not to stay in PE to try to become a VP, I will probably leave for business school after 2 years as an associate. 

I realize this is an extreme 1st world issue, but want to go into the decision with my eyes wide open. Thank you all for the consideration and thoughtful answers. 

 

As far as downsides, it is arguably a tougher role than the associate position.  While you can step away from much of the actual work creation, you are entirely responsible for the quality of the work product.  Take that and add on quarterbacking the deal (including managing third parties), plus more involved portco management, and you can quickly find yourself underwater if not delegating efficiently. 

Other downsides include increased travel for deal sourcing/LP meetings/board meetings and pressure from underperforming portcos given much of your comp potential is carry-based (as an associate all you really care about is the fund not blowing up).   

Some insight a partner gave me - while the hours in the office decline as you move up, the job increasingly becomes 24/7 and the ability to fully unplug decreases.    

 

Other poster (Associate 3 above) has outlined the general pitfalls quite well and don't have much to add. Without knowing what you felt the "let downs" were this past year, it is tough to offer more specific data points-- I, for example, really enjoy working with my sideways portcos and got a chance to do so as an associate as well. As a third-year, I also got to lead 3rd party workstreams, quarterback sizeable add-ons, and spend more time working with a partnership that I valued as colleagues/mentors and friends. That said, I did not go back because of a timing mismatch/seat availability.

In general, I am a fan of taking a third year offer for (a) MBA burn rate mitigation and (b) the opportunity to step up into VP-lite roles if your firm offers that potential. (b) in particular, if backed up by a strong reference, can be a differentiator in MBA recruiting versus folks who just churned CIMs for 2 years (even though those folks were likely superior to me in business evaluation / model creation reps). Both of those are independent from the potential of a partner-track role post MBA, which, as you correctly point out, has material option value.

Two questions you should know the answer to [this may not be germane to your specific question, but I would be remiss to not raise]: (1) are there recent VPs who have followed this path at your firm? and (2) who would pay for the MBA if you do receive the return offer?

 

Can you talk more about what leading 3rd party workstreams looks like as an ASO3? I'm an ASO1 going on ASO2 and many of the critical / advanced points in tax and financial DD and SPA/other legal docs negotiation have been new to me and will take work for me to wrap my head around. I'm curious about what you did to improve.

 

Ideally, there will be smaller add-ons in the ASO2 year where there is more room to fail/learn. My associate fund was very supportive and offered a lot of mentorship, but it's ultimately on you to ask the "dumb" question of a DD provider (doesn't have to be on a group call). It's always ok to ask "what does this mean." For legal, get an associate to adopt you. For FDD/tax, even the more senior folks will generally be happy to explain a nuanced point (although it will likely take a couple of tries for the tax person to make it make sense).

 

So as far as challenges of being a VP go, I would say the biggest is this is your last chance to grow up to be an MD. You're going to start sitting as an observer, maybe even taking board seats, and the pressure to bring valuable relationships to the table (sourcing) will increase too. This is your time to prove that you deserve a shot at principal so it is a very up or out role. 

That all being said, I don't think taking a third year as an associate will harm you in any way. As others have said, you will be able to take on VP-like responsibilities and learn in a low-risk environment. The additional experience will help you even if you decide you hate PE and want to go in a different direction. Happy to answer any specific questions. 

 

If they want you after 3 years + bschool, they should want you with 2 years + bschool as well.

 

Since it looks like you're just looking for someone to tell you why being a VP sucks, I'll have a go at it to make your decision easier if you really want to leave. As a VP you are in the most awkward stage of your career where you have to transition from a worker bee associate to a revenue generating principal. When things get tough if you aren't bring in revenue you really think they are going to keep you over an experience associate who is cheaper and perfectly capable of deal execution? Fuck no. And yet if you are generating revenue by bringing in deals for the firm, you think they're going to give you credit for that? Lol gtfo bro. Some MD is going to show up as the subject matter "expert" and hijack your deal and relationships. And you have to go through an MBA to do all that? There goes $700k of potential earnings elsewhere in the meantime. As a VP you will realize that you are responsible for everything when things go wrong and just a helping middle manager when things go right. And if you want to try to make it ENTER OFFICE POLITICS. The big dogs aren't going to let you get up on their turf and hunt for the companies they hunt for. The fund has a mandate to invest in X Y and Z? Turns out the partners just happen to already cover X Y and Z. And fuck you if you are so stupid as to bring something tangentially related to the investment mandate. Want to spin out to another firm where you don't have to deal with this bullshit? Turns out you cost $500k+ and no one wants to pay for that u less you have closed deals under your belt.

 

This is why I think being a VP at a place that is less structured is key to success. If everyone has their specific swim lanes that they are allowed to operate in, that only prevents your from moving up. I'd rather be at a place that is somewhat fucked up internally without much structure where you can operate independently than just be stuck waiting for the guy above you to move up which is mostly out of your control.

 
Most Helpful

This is a great comment about the trickiness of the role. I think for me the challenge is/was that it's kind of expected that you do and own everything. While it might feel that way as an Associate, you're really just doing the analysis to the best of your ability, but there's always a check ahead of you, which is the VP... So from a simple due diligence standpoint, as as a VP you're responsible for the creation of all the relevant work, which is tough to do if you're not in the weeds doing it, so you need to figure out the right balance of being hands on enough to know what's happening, but hands off enough to have to time do everything else. It's fine if you have great Associates, it becomes a nightmare if you don't. Nothing worse than getting a broken model/broken analysis from an Associate right before something is due. 

On top of that a VP is really responsible for all the other diligence workstreams, legal, QoE, 3rd parties, etc, which in my opinion isn't tough, but it requires knowing where everything is at all times, working towards the right timelines etc. You need to know all the sticking points well and be able to articulate them. You also need to know where all the potential risks are in the deal and how to poke in the right places. 

Then beyond this, the VP to me does the real meat of the developing the thesis, presenting up to partners to get feedback, and then presenting down to Associates to get the right supporting analysis. So you're in the driver seat as far as figuring out if the business can actually make money. Yes, the IC/partners ultimately sign off on it, but it's on your to present the pros/cons in totality on the deal and a good/bad deal will reflect well/poorly on your track record. 

So that's just the diligence piece, as others have said, you're also responsible for adding value to the boards that you're on, which requires a lot of travel, travel for sourcing, especially if you're in the MM, so you're either sourcing yourself, or even if you have some biz dev help, you're the first serious convo founders/bankers etc are likely having so you need to represent the firm and start to figure out how to win deals or at least get looks. This also isn't terribly hard, but it takes its' toll and it  takes time. Having to be on a flight Monday to get to a board meeting in who knows where, time change, etc, then a circuitous route back home because you're visiting some industrials business in the midwest that's gotten flagged as being interesting...turns out it's shitty, you have your first stage IC meeting on Friday, get back on Thursday after trying to delegate work to the Associates, only to find that they're way behind, oh and the head of sales at the portco you visited on Monday quit, so now the partner is asking you what the plan is for backfill and how you're going to stabilize, don't forget, you're trying to sell that business in Q4 of this year, so the numbers have to be strong and you need that to be a good exit to show you can manage a good exit process... just some misc thoughts off the top of my head, but those are all experiences I've had.

Then there's the whole politics piece mentioned above of carving out space for yourself as someone who can make money. I think that's laid out nicely above.

So yea, it's the lifecycle of find deals, do deals, manage deals, and ultimately make money on those deals. That's what PE is all about. At principal/partner, you're more generally more focused on just 1/2 of those steps, same goes for Associates. As a VP, you're kind of responsible for all of them, and in a perfect world, you can be lighter on finding/doing (as far as diligence goes) but ultimately at almost all firms I've been at, you're always going to be doing all of them. 

Last thing is timing, you have 3-5 years to really show that you can do the whole lifecycle and make money. To me, that is what you ultimately have to get excited about as a VP. You have to want to find MM businesses, craft a thesis, and develop them over the course of 5+ years. It's a lot of process and it takes time.

So overall, it's a great role, but it's not the promise land as folks like to make it out to be. It's a grind and carry takes a while to earn. It's a hard role if you really dislike it as it's going to take a while to really make money, frankly you'd be better off just going to a high paying boutique investment bank, grind for 5 years, and then quit if you're really trying to maximize cash earnings in a short period of time. 

As far as your situation goes, if you're enjoying it or at least think you can stick it out for 2 more years, might as well do 3 years, get the Senior Associate title, have the firm help you get into B-School, and then claim that your plan is to go to B-School and the return as a VP and try and secure as VP offer or an offer with as much certainty as possible before going to school. Then you can cruise for 2 years, try out some other stuff and if you find a more appealing offer or frankly just decide you want to do something different, just jump ship. I'm assuming the firm isn't going to pay for school and even if they do, you can always just pay it out of pocket if you don't want to go back. You're in no worse position than just paying to go anyways.

Again, it kind of comes down to how much you dislike your role. You said you don't love it, but didn't provide any other details. If you've closed a platform or two during your time as an Associate, that's better than most, so you're getting good deal reps. If you hate the culture, that's not going to change as a VP. If you don't love the work, it's frankly not going to change much in PE in general. Yes, you might not be building all the models/decks, but you're still dealing with the same bullshit and as other have mentioned, it likely only gets worse. 

If you're going to go to business school, you might as well stick it out to have the opportunity to go back, if you're done with PE, might as well leave as soon as you can. I don't see any reason to do 2 years, not get the promotion, and go to business school without a return offer in hand. You either don't like it, so you leave or you like it enough to stay and derisk.

 

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