PE associate comp

Thanks for tagging me kanon. There are two things I'd share here.

One is a point about negotiation. As kanon said, it's imperative that you do this verbally. You really should aim to do this in person, but if that's not possible for some reason (e.g. the firm is in another geography and you've already traveled back), pick up the phone.

This is one thing I've noticed a lot of us in the younger generation (90s and onward) drop the ball on. There are certain business norms that are now incongruous with evolving social norms.

Ask someone under 30 what their primary communication app on their phone is; it's invariably something about texting (Messages, Whatsapp, etc.). Ask someone over 30 (maybe 35); it's invariably the phone. It reminds me of the Reddit joke: "There are two groups of people in the world: those who wipe standing up and those who wipe sitting down. Neither knows each other exist."

If you ever try to negotiate over writing, it's a no-no. We'll never know in this case because the ship has sailed, but they may have been willing to negotiate yet closed that door completely once you tried over email. Take it as a lesson learned. Happened to me once, never again.

The second thing is that I'd encourage you to think of the broader framework of 'compensation'. I wrote a lengthy comment about it in another thread:

APAE:

I would sidestep the question of cash compensation for a broader picture of compensation. I am now struggling to remember who first told me this (I've said it elsewhere on this site), but you should think of compensation as having two elements: the money you get paid that you benefit from today, and the skills and relationships you get 'paid' with that you'll benefit from tomorrow.

In your shoes, I'd spend all my energy assessing the culture and methodology of the firm.

• Is this a place where senior people take the time to show junior investment staff the intricacies of each component of the deal process? Are you going to be given enough support on your first one or two processes to get your legs under you, then eventually enough leeway to stand on your own two feet and run with one yourself? Or is it a place where you're simply tossed work with a deadline and expected to piece together the bigger picture yourself on your own time.
• Are people collegial and collaborative, helping each other out with projects? Or is it an atmosphere where people silo themselves and adopt a dog-eat-dog mentality?
• Are the partners respected in the professional community? Do service providers (banks, lawyers, vendors like accounting / audit / tax), dealflow sources, industry executives, other investors speak of them favorably? Can you diligence this on both professional skill and personal behavior? Or do people speak neutrally or disfavorably ("I wouldn't let him into a process if he begged" / "Sure, I showed them something once, they soaked up a ton of time and never even submitted a bid at the end of it all")?

The real question is whether this is a place you feel like you'll learn a lot and grow into the investor you hope to be. This has an objective and subjective component. Objectively, you want to be someone who's knowledgeable about sourcing, structure, oversight, exit, and fundraising.

Layne Staley has some kind of heuristic around this that I vaguely recall having some kind of sports analogy, like the basics of pitching or something like that.

Subjectively, you want to be attuned to the specifics of:

• sourcing for the industry(s), deal sizes, and deal types that help keep you jazzed to get up in the morning and do this job
• structure in a way that lets you attract the opportunities you want to (e.g. being low-IQ about management participation on the cap table means sophisticated operators will probably sniff that out early in conversation with you and pursue a different financial partner)
• oversight in the way that lets you live the dynamic you're comfortable in (e.g. do you like flying 10,000 feet high and getting fed stuff at the board level by an experienced set of operators you installed, allowing you to manage six boards personally ... or do you really like sitting behind the steering wheel and driving the whole bus yourself, restricting you to two boards and narrowing the type of executive who is a good match for you to those who can deal well with a lower level of autonomy)
• an audience of qualified, credible, and motivated buyers whose personality and psychology you understand and grok with (strategics vary widely between industries [operators in the FIG universe tend to be pretty cerebral and also moderate to high in ego, vs. the stereotypical barrel-chested Midwestern steak-and-potatoes guys in a lot of industrials or manufacturing businesses], and the motivations strategics have are very different than those of sponsors)
• fundraising from the type of LP you want to have in your vehicle (do you want five big LPs that are each 15-25% of your fund, or do you want 80 LPs and a really well built-out IR apparatus inside your business)

In short, this fixation on cash comp feels short-sighted. You should identify what type of investor you hope to grow into, then grid this opportunity against that. If it scores highly on these qualitative dimensions, you can more happily commit to a slightly-below market cash offer knowing that you're getting 'paid' with a bunch of intangibles that most people aren't thoughtful enough to identify.

Also, if this is a state like Texas or Florida, you're pretty much on par (maybe even ahead of) with your New York / California brethren on take-home pay. I would be explicit and ask your prospective employer if that was part of their calculus in setting the pay scale. Chances are it was. If I know I have to pay someone $250k in New York but I could put them Texas where ~$175k yields the same post-tax income, that feels fair to me.

Lastly, there's a huge difference between a firm size of $500m (total AUM) and a fund size of $500m (most recent vehicle). If it's the former, your comp offer is not unreasonable at all. If it's the latter, I think you have more wiggle room to negotiate upwards.

I hope this works out for you.

If everything except cash comp is a biggreen flag, I'd say go ahead. One point is that if you do take the offer, you may want to briefly grab whoever you tried to negotiate with over email and apologize quickly.

It doesn't have to be traumatic, just say something like "Hey, I want to reiterate how happy I am to be here. I believe everyone owes it to themselves to try to maximize the value they receive so I think there's nothing wrong with negotiation, but when I was updating one of my mentors on this career move he told me I may have made a faux-pas by initiating things over email instead of in person or on the phone. I'm glad I learned that, and I wanted to close the loop quickly by letting you know I know that now. Thanks again for your attention and help through the interview process." It takes 30 seconds and will pay limitless dividends in the office psychology landscape.

Good luck and congrats on the offer.