PE role with terrible pay?

Currently a newly promoted Associate 1 in London with a base salary of £90k. The truth is I only stayed on for the A2A promotion because I never received any buy-side offers whilst recruiting during my Analyst years. I really don't enjoy banking and want to make the move.

I'm now interviewing for an Associate 1 position at a start-up PE fund focused on small-cap. They've just raised $150m for their first fund and have less than 10 people in the investment team.

Interviews have gone well however they said that because they're small-cap focused and a start-up, they can't afford to pay market rate. They mentioned Associate 1 base salary will be £70k and up to 75% bonus with no carried interest until the VP level. That's c.£120k vs c.£180k in my current role.

The role sounds cool but is the comp just too low and unwise to take (if offered) or is it still marginally acceptable? I'm also worried that this signals that even years down the line they will still be paying below market standard.

Should I suck up my current role and stay in banking given it pays 50% more and continue to look for other roles (even tho I tried for three years and had no luck during my analyst years) or take the big pay cut for the PE role I'm more interested in.

Comments (18)

Sep 9, 2020 - 11:43am

I would continue recruiting. You should normally expect a pay cut when transitioning from IB to the vast majority of junior PE roles in London but in my experience we're talking a 15-20% discount at most. I might have revised this answer if they were offering carry but as it is you're really better off staying in banking and reaching out to headhunters

  • Associate 1 in IB - Ind
Sep 21, 2020 - 9:16pm

Thanks for your reply, I do agree that this feels too low but could be acceptable if they were offering carry.

How much carry would you say would be fair to offer an associate at a start-up fund like this that is paying a very low salary? I might try to negotiate carry, if I get the offer.

Most Helpful
Sep 15, 2020 - 7:30pm

Don't do it! Switching jobs is something you only get one shot at every few years, and they are the most important career trajectory decision you will make. When you do it, you need to do it right.

If they were being genuine, I might say take it. However, it sounds like they are lying to you. It sounds like they are just looking for cheap labor. If it was really a cash flow problem, why wouldn't they offset the lower than market salary with carry? It wouldn't cost them anything today, and would motivate you to help them make the firm a success.  

You should ask yourself, why should I join a startup PE fund, which has risk, with a sub-market salary, without exposure to the upside if this thing works?  

  • Associate 1 in IB - Ind
Sep 21, 2020 - 9:22pm

Thank you, I do agree but my only worry is that I've been trying so hard to make the move over the past few years and this has been the only opportunity that I stand a chance, (possibly because all other candidates are turned off by the low pay so don't pursue it haha)

I would have thought most start up funds would offer carry to associates, and a start up fund that also is paying a low salary would offer an even higher carry amount on top of this so im surpirsed they are not offering any. How much carry would be fair to offer an associate at a start-up fund like this that is paying a very low salary? I might try to see if i can negotiate carry.

  • Associate 1 in IB - Ind
Sep 21, 2020 - 9:33pm

I think so yes, I would be comfortable taking the lower pay knowing I had some upside if the fund.

Any idea how much carry would be fair to offer an associate at a small start-up fund that is paying a very low salary? I might try to negotiate carry if I get the offer but unsure what would be a fair amount.

Sep 18, 2020 - 8:01am

Wouldn't do it. Typically you get carry in smaller funds that can't pay much in cash compensation. No reason to take the paycut. Keep looking and try to find a place that has more assets under management. 

There are a ton of private equity firms out there. Try to find one that has more AUM and a good track record across multiple funds. More AUM typically leads to higher pay for everyone.

Would read more about what compensation is typically like in PE here: Private Equity Salaries and Bonuses - From Analyst to Partner

  • Associate 1 in IB - Ind
Sep 21, 2020 - 9:25pm

Thank you, very useful link.

How much carry would be fair to offer an associate at a small start-up PE fund that is paying a very low salary? I might try to negotiate carry if I get the offer.

Sep 18, 2020 - 12:56pm

I think you have to think about this in absolute terms and gauge your decision less on comparison. You should ask yourself if that's enough money for you to support a quality of life that you find comfortable; comparing the two numbers side by side is a distraction from honestly asking yourself if this is enough compensation to move to something you would be happier doing. If you think it is, then you should make the move - having a job that you enjoy / don't completely hate can be worth much, much more than the delta in comp you've outlined in your post. That's just my two cents and I try to think of the world less simplistically than on monetary terms, but to teach their own.

"Rage, rage against the dying of the light."
  • 1
Sep 18, 2020 - 1:50pm

It's low but not uncommon: PE Associate roles are generally in the range of £70-90k base. You're competing with candidates from small consultancies and Big4, and for some of them this can be a step up. 

Think about team fit and responsibilities. Would it be a more interesting day-to-day for you? May it open doors further down the line?

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