"Overnight" Crypto millionaire - now how do I quit my PE job with the option of going back?
26 year old associate at a UMM / MF PE shop.
A year ago, I put in $60k into a coin that I really believe in, and have just finished selling off 80% of my position at a blended ~20x MOIC.
Feels good. I'm thinking of taking a break from work since I've basically made my next 5 years of take-home pay. Don't get me wrong, I like my job a lot, but I feel almost obligated to have a bit of fun, take some risks, and actually enjoy the remainder of my 20s. I'll park my mini nest-egg in a portfolio targeting 12%+ cash yield and either go back to school (PhD) / start a business / travel the world. Aiming to not deplete my savings and just live off DeFi stablecoin yield + dividends for a few years.
My question is: how do I quit my job and leave finance but still maintain the option of coming back to my firm? I don't really have everything figured out, and since I like my job, it would be nice to keep the option. Should I just be honest with people, i.e. I made a buck and want to take a break but I like my job? I feel that if I leave and don't tell anyone the true circumstances they might think I've lost interest in the industry / burnt out / etc, which will impact my ability to come back.
Advice?
What kind of portfolio is going to passively yield 12%?
~80% of portfolio in stuff like mortgage trusts, REITs, BDCs, plain good old dividend stocks yielding 7-8%
~20% of portfolio in a basket of DeFi stablecoin yield programs with weighted average yield of say 25%. Anchor UST (the safest I can think of) will yield 18-20% and will probably be the bulk of the basket.
Damn I need to learn all this. Looks like the over market bulk is coming from crypto. Any source or place I could learn about the DeFi? I have cash I’m looking to park. Thank you!
lol wtf. There is no legitimate/non-pump-dump crypto with yield anywhere near 25%.
Anchor UST (the safest I can think of) will yield 18-20%
How are you getting on?
Dude this was my first question - I forgot his entire question once I saw this
congrats on the success, let's get into #'s: you've netted 960k pretax, it you get LTCG treatment I'm guessing you'll have to pay a combined tax rate between 23.8% and 37% if you live in CA, so your net net will be more like $730k and $604k, a GREAT start to be sure, but not financial independence...yet
if I were you, I'd be dead honest with your boss, saying you want to take some time away to pursue various personal interests and weren't sure what the firm's policies (if any exist) on sabbaticals. perhaps they don't offer them, but instead let people take extended time away unpaid and just dock their bonus accordingly, perhaps they do offer them and you can stay on, perhaps it'd be a career killer.
here's the cold hard truth, just like mothers going on maternity leave, this will set back your career development, no matter how good you are, so make your peace with that. new classes of associates will come through and gladly take your spot, and potentially your place on the ladder to VP, realize this is not just a possibility, but a probability. thinking with an eye to the downside will help your decision making. if you think that you can easily find another gig after your sabbatical, fine, but realize that you will be behind your peers all else equal.
also, how are you positive of your 12% returns on defi? what happens if this assumption turns out to be too lofty? what happens if defi goes away/becomes incredibly less profitable? I'm not saying you're wrong, I'm saying you need to challenge your assumptions, just like you wouldn't recommend your firm buy a business if the FCF yield assumption is too lofty and without a margin of safety, I wouldn't recommend you put your assets into a novel asset class if the success of your endeavor largely (if not wholly) depends upon it
if it were me and I wanted to do that, I'd do the following - play the school route. you can be a non-degree seeking student (you don't have to tell them that) and just say you've been toying with the idea of going to graduate school and some recent financial windfall affords you the ability to do that but not have to work, and were wondering if the firm has a program where people can go to school and then come back or what that would look like. the benefit there is this - you can take a few classes a semester and arrange your schedule so you can pursue other interests like a side business, venezuelan 20-somethings, classes you'd need to get a phd (to see if you really like it), and travel (if you're not seeking tuition reimbursement, they don't need to know you're just taking one class online and spending most of your time on the beaches of marseille). downside of this is they may treat it like some IB treats analysts, you go to your MBA and you don't come back, but you can get good placement
but here's what the real me would do - reflect on why I want to leave in the first place and if this sabbatical would even begin to scratch the itch. maybe it will for you, but maybe you're running from something and see this as an easy way out but want a safe fallback. what is it you're missing out on? if it's travel, do you really think you can take a couple years off travelling the world and then go back to looking at CIMs on the weekends? fat chance. if it's autonomy, ditto. good luck taking orders from other people after you've just spent a couple years calling all of the shots. you could find everything you're looking for if you do this, but you could also come back disappointed and less wealthy (just by virtue of spending, not misfortune). I just wouldn't go into it lightly because the downsides here are considerable
Thank you. Fantastic advice as always.
My firm does offer MBA sabbaticals but I have 0 interest in doing an MBA unfortunately. If I went to school it would be for something like computational biology. I guess what I'm aiming for is to leave on the best possible note and keeping the relationship warm enough that the convo to coming back is more doable.
The maternity leave comparison is a very helpful way to think about it. But does being 2-4 years removed from a PE job really spell that much disaster from a career development standpoint? I know kids doing JD/MBAs at Harvard (which is a full 4-year commitment) and they feel relatively comfortable about their career trajectory. Besides optics, is there anything substantially different about doing an MBA vs spending the equivalent amount of time in a masters/PhD program, or building a startup? Isn't it the common understanding that B-School is basically a socially acceptable vacation where you don't learn anything?
If you were sent a resume of someone who went to a top target, was top bucket at a BB, then top bucket in UMM/MF PE, but then did something "non-traditional" for 2 years, how would you weigh interviewing that guy vs. a JD/MBA student with similar profile?
On the 12% - the target yield itself is really not the crucial assumption. The reality is that I haven't figured out the risk weighting of the portfolio (how much Defi vs. stocks/bonds), but life still works out if I target 7% instead of 12%. Just means I spend less, and I'm a frugal person anyway. Or, if I really need that extra spending money, I also have decent personal savings from my 4-year career which I can use to increase my annual cash coupon (probably would target only ~4% bond yield for this piece). In any case, no more than 20% of the portfolio would be Defi (maybe even less, like 10%).
I still think your yield assumption is too high, I'd target a lifestyle you could make work with 0% return. what if the next 5y are like 1969-1974? 1998-2003? no way to know that, and if your lifestyle is dependent upon your CAGR, I think that's an asymmetric payoff - either you're massively disappointed or you're satisfied
and I can't answer those questions on recruiting well, I'm just saying that all else held equal, you will have X years less work experience that other people at your age who didn't do a sabbatical, and that could affect your opportunities. maybe it doesn't affect them and your performance speaks highly enough that it's nothing to overcome, but to think you'd be on par with someone who has 2 more years experience than you at the same age is just foolish. I don't think it spells disaster, I just think you need to make sure that the time away is worth whatever future handicap it could give you
you still haven't answered the last question about whether or not if what you're planning even accomplishes what you're hoping for (unless you just do the scholastic route, which is another thing entirely, but I don't see how that makes you "enjoy the remainder of your 20s"). I'd argue that beyond how you speak to your bosses, this self reflection is the most important task you need to do before moving forward, but yes if you do a phd/startup/study sabbatical and your firm already has a program in place for educational sabbaticals and you're top bucket, it's not like what you're asking is totally out of left field
Get an MBA
or Take a year off to travel, study for GMAT and get the MBA after
why don't you just start your own business or buy an existing business?
While it is typically safe to assume someone in PE has the relative knowledge to do this, not everyone has the skillset to effectively operate a business.
hot take: yes they do.
Zero interest in buying a business.
Zero interest in starting an income-generating business. Strong interest in building a cash-bleeding startup, but obviously not from a wealth-creation standpoint, but more from a fulfilment standpoint. I have a couple technical ideas I want to see tested. Early stage fundraising is also fun and exciting. I work in growth equity and I guess you can say I have investor's envy - I'd love to be in the seat of the founders raising money from me.
I did LBOs earlier in my career and honestly I have come to the conclusion that working with businesses that make positive FCF yield are so god damn boring.
damn. different strokes for different folks I guess. if I had that kind of cash I would probably just buy some laundromats/raise outside capital to buy some more laundromats. I have a big thinker type of idea too but my thought is it'd be better to get rich doing something less sexy with high probability of success and then chase the risky thing later once I'm set up. check out sweatystartup that's basically his take.
So what Crypto did you step in to? Fartcoin?
Cumrocket
Ha. I got into Terra (LUNA). I’m actually a really big believer, it’s a smart defi play with strong utility outside speculative value. $150mm VC fiat money is backing the ecosystem. Still holding 20% of my position until kingdom come.
thanks. ive never heard of that one tbh. I hold the usual - uniswap, aave, btc, polkadot.
are you axed on any other names ?
just looked up Luna on Coinbase... wowzer
Damn bro, I hope you managed to get rid of the 20% position before it went to zero in the past week.
How did you determine which shitcoin to park all your money in? Could this criteria be applied to other shitcoins? Did you do it with other cryptocurrencies and fail or was this the only thing you invested in?
Honestly? I have a couple friends who are professional VCs in the crypto space and they both started talking about the coin at the same time and advised me to put some of my money. I read the white paper, was impressed, put in 60k out of my (at the time) 150k savings so it wasn’t something which would bankrupt me.
Besides this, I’ve only invested into ETH but the gains aren’t nearly as impressive, but still good.
Congrats on the successful investment so far. Best of luck with your career / life decision. Any chance you have some other crypto’s you are interested in that you want to talk about? Can you elaborate more on why you like terra and/or some of its applications?
Keep the PE job and invest what you can afford to lose.
how many are spending 100 hrs research to lose all their cash money?
You seem like a real winner.
Put it all in a LINK/ETH pool and collect baby
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The main thing to remember is they are not judging you “sabbatical” they are judging the fact your flight risk and independent. The JD/MBA folks are very very tied to their career once they finish that program. As the bro said, you will not ever possibly be the same again once you feel that full independence. You mention your resume is a clearcut “straight line of high achievements” than isnt the only reason a firm going to interview will be “why did this guy take sabbatical, what happened here…” your whole candidacy will depend on it.
That all said…leaders of many of the firms we all work for in their younger years got off the straight path. Its only the last 15 years we have perfected this corporate drone path to PE/HF/VC partner.
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Start a pornography production company
Use a cool name too like CryptoCoochie.net
Looks like your DeFi returns are about to start getting regulated: https://www.wsj.com/articles/cryptos-defi-projects-arent-immune-to-regu…
Start or join a crypto fund? You can do that from anywhere.
Regarding re-entry to PE - Just say you got incubation capital and took the risk/bet on yourself blah blah. Shows your firm that you have a set of nuts?
What if you got a related remote job with much more chill hours, e.g. convince a good but smaller family office, HF, tech Corp dev, or AM to let you work remotely. You could even take lower salary, which lets you still cover expenses and retain career optics while also getting the desired flexibility.
DM me, would love to discuss this further as I know other folks in a similar boat.
Hope you are doing well king.
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