Growth vs. Private Equity - What would you choose?

Currently a second year analyst at a top BB trying to select between 2 offers. I am paralyzed in the decision making process as both offers are amazing in their own ways. I would love feedback from someone who made the transition and can speak candidly about the move.

Opportunities I am Considering:

Option 1: High Performing Private Equity fund (Berkshire / Clearlake / TA / Francisco / Other)

  • Pros: Great Salary (300k +), able to work on high-profile deals, rapid acceleration in career trajectory (i.e. great Brand name to work elsewhere in 2+ years)
  • Cons: Brutal Hours (Can someone please confirm?), excel jockey, not quite a flat structure (Associates are certain to be at the bottom of the totem pole)

Option 2: Growth Equity Fund (top quartile returns and large fund sizes; tier 2 city)

  • Pros: More autonomy, hours are flexible (45-70, depending on deal processes), top salary bracket for GE (250-300k), rapid development of VP+ skills (will be meeting with clients, managing VP level workloads)
  • Cons: Lack of brand name, high risk due to relative recency in fund

My Thoughts

Fully aware this is a great predicament to be in, but that is also why it's so hard to choose. Long-term I have a more entrepreneurial mindset and would like to either 1) transition to a MD level position at a GE shop or 2) join/create a start-up as CFO/COO

I am willing to grind as needed, but if the job is banking 2.0 I would choose a better work/life balance over additional pay. I'm leaning towards the GE position as it seems to be a higher value-add / engaging role from an Associate perspective. Life is short and I'm not willing to waste away my 20s, no matter the pay.

Thanks for whoever got this far - would greatly appreciate any advice!


tl;dr: Choosing between a PE and GE opportunity. Please advise!


 

GE gig seems really fun and adventurous, but you can always do it after PE or MBA. What is the fund size? If you are given a lot of autonomy as you mentioned you might enjoy the work a lot more. 

 

Thanks for the input! Fund size is fairly large given the typical check size. Not able to provide specifics but I will say it is multiple billions.

Agree that the GE gig sounds much more interesting from a day-to-day POV. I would also agree that the golden path of 2+2 in banking & PE is the path of least resistance, but honestly, I am a bit burnt out and would rather try something exciting than be risk-adverse my entire life.

Have you heard anything from past alum that tipped the scale one way or the other?

 

I honestly believe the pay differential is negligible earlier on, so really focus on what you’ll enjoy and how it’ll improve your skill sets. GE is great and only gets better as we have seen with LP interest and multiples some of the hot industries in GE (tech/saas). If this is tech/consumer investing, even better. I’d go with GE, but get ready to do a lot of sourcing and business development work on deals. Happy to provide more input as I have many friends in the GE industry.

 
Most Helpful

GE gig seems really fun and adventurous, but you can always do it after PE or MBA

YoU cAn AlWaYs dO iT lAtEr, jesus you guys really have zero risk/fun tolerance. 

Man, you're thinking about doing startups, why even considering boomer PE shops? Growth deals are cooler, sexier, more interesting, more exciting  and sometimes even fun to work on. If you have absolutely zero interest in pursuing stuff that's actually cool and wanna be an Excel jockey to brag how well can you MoDeL, then go with PE, otherwise don't look back and take the growth offer. 

Unless you have some obligations, money difference is meaningless at this stage. 

 

Thank you - the hard truth is what I need to hear at this point.

Could I ask how your experience has been? Are you trying to exit, lateral to GE, continue working towards VP... bottom line, why are you a hard no to PE given you are in the industry?

 

I am a hard no because this job is uninteresting, culture is bad, and making $350k vs. $200k doesn't change my quality of life. I would rather be talking to founders, working autonomously and among respectful people, and working on interesting things and not turning every far corner of the data room. I am interested in technology and want to spend all day thinking about emerging products, markets, and founders. If this sounds like you, then you should just take your GE offer.

Once I got to the holy grail of finance I looked around and realized there's no point being here if it doesn't make you happy.

 

Can't speak for others but currently at a $6-8bn fund PE (similar caliber to the ones you named) and certainly the hours are rough and it is more intense than in banking. While I've learned a lot I can't help but find the role to be boring. PE at the junior level is just banking 2.0 (excel / PPT work) and at the VP/Principal level project management (which sucks even more). I can see the appeal once you're able to make it to the MD/Partner level but that's another 8-10 years out at minimum.

 

Go with the GE offer. If you think you want to be in GE long term, there's no time like the present to start building that skillset. Tier 2 city will likely allow you to live a better lifestyle, even with the reduced pay, and it sounds like the fund has performed well, which mitigates the risk that you won't learn anything and/or the fund will cease to exist in the next 2/3 years you're there. I would ask around your ability to not have to go back for an MBA and if they do want you to go back, how they could help you get into H/S or other top schools (but mainly H/S). Small funds should have much more flexibility in letting you move up within the firm.

Nothing against going with large cap PE, but the lifestyle will be brutal, you're really just be cranking on analysis/modeling/ diligence most of the day, and you're almost certain to get 2 and outed at which point you'll go back to business school and then likely be re-recruiting to be at a good growth equity fund in a more chill city where you can envision more of a sustainable life, haha. It's tough to turn down the offer of a bigger fund, but unless you're driven by the prestige/accomplishment of a name brand fund, love working on bigger deals, and know that you're setting up to try and be a Principal at a UMM/MF, I don't see much of a point to the name brand offer besides optionality, but you'll sacrifice for that and will likely just want to do GE after.

 

There's a lot here about comp, role, wlb, etc. which all are important but an underrated part of this question as you think about the longer term is what type of investing/businesses do you want to be doing? Growth is very much no leverage, underwriting the growth of a business (you would think that's obvious) and higher beta (some 5x's, some 1x's). Businesses often won't be profitable and you'll be paying prices that aren't justifiable in any math you can drum up (no, seriously 22x YE ARR will never pencil out in any model). You'll be negotiating minority protections and much more passive investing. Diligence will be a lot more market focused as businesses have less data and operating history to evaluate.

I can't speak as much to PE but my understanding at least is PE = levered control deals, much more involved, lower beta but less screw-ups (read: you won't be investing in a bunch of 1x deals). You won't spend hours thinking through "well if we have a block on a sale under a 2x, do we really care if we have a coupon on our preferred? Are we aligned with the Series B investors? etc." Much more data driven/quantitative. 

I really don't think either is better or worse but you may prefer/have more interest in one style or the other. Just something to consider...

 

I've worked at MF PE shop and at a top quartile GE fund and I would do GE any day for many of the reasons listed above and as my personal interests as well.

The work is just far more interesting, you get to meet really fascinating entrepreneurs, and investing in a company is seen as more of a partnership rather than pulling teeth, etc. Keep in mind, my shop was a cold call heavy firm (a Summit, TA, etc.) and had a phenomenal track record investing already so the culture there was more or less set and I felt 0% risk being in my seat  

 

The real variable that matters here is how developed you think your skill set currently is. 

The value of good associate programs is that they help you develop the skill set of an investor. The reason they recruit from banking is because the analyst program provides the foundational technical skills that you can build on as you begin to think critically about whether or not you should do the deal (investing), as opposed to how to do the deal (banking).

Unfortunately, as the asset class has grown increasingly institutionalized and calcified, the associate program has moved from what it was even only a decade ago -- an apprenticeship program where you learned from people -- to a churn 'em and burn 'em funnel of bodies that are treated as interchangeable or disposable.

What this means is that you need to really diligence the specific buyout firm in front of you. There's a difference between TA and Francisco. Are you just a body, or are they going to invest in you because they want you there for the long run and it's a disappointment if you leave?

There's also a difference in the industries they invest in. Berkshire does a lot of 'old economy' stuff. Francisco is all the older generation of 'new economy' stuff, if that makes sense. Clearlake spans both. 

rapid development of VP+ skills

There's a really important nuance here.

The value of your associate job is not how quickly you get to the job functions of more senior positions, but how well it equips you for those functions.

Just keep in mind that the first job may actually do more for you on this dimension if you look at it from this different light I'm highlighting.

Put plainly, a generic buyout shop probably doesn't do much for you because the partnership is calcified, is not interested in adding new blood on any kind of realistic or respectful timeline, and will happily grind you down inexorably while bragging about the "collegial" culture. But certain firms are populated with people who, while working hard, will actually show you how to think -- and that's invaluable. That will make you a better VP (and Principal, then Partner) than a firm that starts letting you get VP reps right out of the gate.

Long story short, without knowing the specific firms it's hard to say.

I would probably lean toward the second option because growth equity generally implies 'new economy' and it's important to start developing knowledge and a relationship set in the spaces that are what all of tomorrow will be + the lifestyle really is better + while compensation should be the lowest importance factor, a lower cost-of-living city more or less evens out the disparity to top buyout comp.

However, for a particular firm, I wouldn't be scared of the buyout option. 

Good luck, and congrats on your success so far.

I am permanently behind on PMs, it's not personal.
 

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