Very Tough Decision - Short-term Comp vs. Long-term job
Very tough decision for me here, I'll try and put it succinctly, but appreciate anyone and everyone's thoughts on what I should do. It basically boils down to massive short-term comp vs a long term job, but with some nuances.
I am a VP level guy. My last 2 PE firms (as Senior Associate out of business school, which I paid for myself, and then VP) were basically startups, and I accepted very below market comp and no cash bonuses in order to get the high upside of carry, to learn a lot, and to get exponential pay as we grew. Definitely learned a lot, but got laid off from both these firms with no bonuses and not much comp. That's 5 straight years since I earned real comp (2 years b-school, 3 years at the 2 jobs). Last layoff was about 7 months ago so I've been feeling even more financial pressure with no paycheck since then.
Current financial situation as a result: No savings, some credit card debt, lots of financial stress. Basically, I'm pretty piss poor in general, much less for my age and level. I'm a single dad with a toddler so that's been incredibly stressful to provide for, but I do have parents close by who watch him a lot (saving daycare fees).
Recruiting situation: Pretty bad. Because of these 2 job moves in my recent past, I had a lot of trouble getting past first round interviews. I got better and better at explaining my situation, but I was basically persona non grata with any PE firm, the Big 4, corp development, smaller firms, and just about anything else I tried etc. It's been a tough journey.
While looking for a full-time gig, I got connected to this guy who was raising $15M of capital for his company. In exchange for me leading and executing that capital raise, I would get 2% of the capital raise upon close. That's $300k! Obviously, a life-changing impact for my personal balance sheet. I did my diligence to see if this was a reputable guy and a reputable company that could and would raise capital and pay me, and I was satisfied. So, I started this project 2 months ago. I estimate the project would close end of May. On top of that, the guy said if this goes well (and he loves my value-add), he would do the same for me for his 2nd company in the late summer, which should be another $200k. I have good reason to believe in this happening. After that, I would need to find a fulltime job, this time being out of the full-time market for 12 months but $500k richer.
In the meantime, I recently finally started to get real traction in interviewing with a firm for a full-time job. I just got the offer, which is the first and only one I've gotten in 7 months of recruiting. It's also a small PE firm, but has some existing investments that have done well and is growing. Comp is ok but not great - all-in about $150k for the rest of this year. Helps the financial situation but not dramatically so. I'm supposed to begin mid-April. It would (hopefully) be a long-term job, rebuild my resume, enhance my PE skills, and set my career path for the long-term in PE or whatever I choose to do after doing this for at least 5 years.
Let me get to the crux of the decision I need to make: Because of the timing I have 3 options: 1) finish the cap raise, get amazing short-term comp, lose the full-time offer, do the 2nd cap raise for great comp, and then basically be out in a tough market again where my job moves and 12 months without a FT job are problematic; 2) Drop out of the cap raise, get no comp, be near broke, start at this good PE job with ok pay and basically have to wait until Dec 2020 (end of next year) to get a bonus that actually really moves the needle in my life in terms of credit card debt, savings, and being financially comfortable. 3) try and thread the needle and do both (but not the 2nd cap raise), but I'd have to push the PE firm start date 6 weeks and there's almost no way that conversation goes well, especially if the guy thinks to himself "who's to say this guy will actually start in 6 weeks and is not just leading me on?" He's a nice guy but he certainly could think he is being taken advantage of, or I am misleading him, or I am breaking my word.
What do people think I should do, or what would you do in this situation?
$150k all in is pretty low comp for someone at your level; you'd be working there 8.5 months this year vs. 12 next year; can comp really go up that much?
I think the capital raising is way more money, and you can pitch it as something more "full time" than you think.
How set on you on the dream of being a PE investor? Do you see yourself doing the capital raising work (or even banking) long term?
Something else to consider is how sure are you of the $300k from this one, as well as the $200k from the potential next one.
Correct, it is pretty low comp because it is a small firm. 2020 would be a full year and base and bonus would go up somewhat based on higher management fees from the portfolio companies, so I project $250k in 2020, weighted towards end of year of course
I am pretty psyched to be a PE investor for the next 4 years at least, but this is my last shot at doing so. I am not sure if an investment bank will hire me to do capital raising long-term based on these 2 successful deals, even with my PE background. I really struggle to think what my exit opps would be from this. I am not really developing more of my skillset. I could hop to other capital raises that this guy knows and will give me a reference for, but that is more uncertain.
I'd say 90% chance for the $300k, and 80% chance at the $200k. Both are real companies with potential investors already interested. Not gonna lie to you, it would be DEVASTATING to give up $300k that is 2 months away.
Honestly just here to give you my support -- I have no idea what I'd do in your situation, especially as a single dad.
$150k is pretty low but it may create a career for you vs. the 1-2 shot and done.
Thank you for your support. Note that the $150K is for the 8.5 months left in the year (once I start). But yea, if I don't get this deal fee, that would be all my comp for the year
Could you tell the PE firm about the first capital raise situation? Maybe the PE firm will let you start a little later or let you finish up your first capital raise while working full-time. I would think if you explained the timing situation, coupled with being a single dad, most employers (even in PE) would either understand and accommodate at least finishing up the first raise or try to make you partially whole via sign-on bonus for the money you're leaving behind (hell I've seen PE firms give analysts recruiting into associate roles sign on bonuses for giving up their 2nd/3rd year analyst bonus). If not, frankly it'd raise some questions about whether this is an employer I'd want to work for long term.
Well, that would be option 3 I list above, which would be threading the needle and doing both. I would LOVE to do that and would do that in a heartbeat if possible. The issue is telling the PE guy I need an extra 6 weeks, when I told him since I started interviewing in January that I'd be done by April 1. He could take this as indication that I am not a man of my word, or I am misleading him or jerking him around. I feel like I risk having the offer pulled with such a delay (I'm pretty confident I could postpone 2 weeks without issue). And then I would be so mad at losing the opportunity.
Not only that, but they are a small firm so could really use my help asap, so it hurts them to have me start later.
I like your thoughts about explaining the situation. I'd really need to beg and see how he reacts. Do you think it'll sound like a reasonable request, even though it would directly hurt his business to not have me join for another 6 weeks?
Well, it sounds like you started the capital raise project right around when you started interviewing with the PE firm. So without an offer in hand, it would have been prudent and logical for you to earn additional income while interviewing, and timing of capital raises are always unpredictable. In other words, you weren't purposely misrepresenting when you could start. (A PE firm of all people should understand fundraising is hard to predict, although that also cuts both ways because your estimate 6 weeks could go on even longer).
I don't think you necessarily need to "beg". I don't see anything wrong with saying something along the lines of: "I have an existing project that took longer than originally expected. I believe it'll be wrapped up in 6 weeks. I absolutely want to accept the offer, but because my situation, would it be possible to start in X or find another alternative that is more amenable to you." and see what they counter with. It's hard to speculate how the PE firm would take it, because I have no idea which firm you're interviewing with or how the managing partner is (or whoever is the decision maker). I've generally found that for really strong candidates, especially experienced hires that are viewed as potentially partner material, the firm would want to try to at least do something to accommodate. Particularly small firms that don't want to be constantly churning employees.
If I absolutely had to choose one or the other, I'd probably personally take the PE offer assuming it's a place I envision I could stay for a while. Between hopefully a livable annual cash comp plus presumably carry that will eventually vest, I suspect you'd be ultimately better off financially taking the offer.
All that said, if I were interviewing with a small PE firm and presumably one that I intend on staying for a while, culture and sensitivity to an employee's personal obligations would be really important to me. If my potential employer wasn't even willing to entertain a rational discussion on a very sensitive and important topic, I'd have serious reservations about joining the firm or certainly wouldn't view the firm as a long-term place for me. That is just my personal opinion, which I really caveat is based on my personal experiences and position in life. And by position I don't mean that monetarily I'm set, so money isn't a consideration. I just mean I've been in the workforce for a while (similar to you), and I'm less willing to overlook important things like how a firm treats its employees just to build my resume. The other thing to consider is if you've already been at two PE firms, you most likely have the opportunity to join one or maybe two more PE firms in your career. I don't think I've seen very many people (or anyone) have more than 3 or 4 PE firms on their resume before being forced out of the PE industry. After that, regardless of the reasons, I think most firms will assume you weren't partner material. Given that, you'd ideally want your next PE job to be one that you think you can make a "career" out of.
Alternatively, maybe you could try to delay starting for 4 weeks. Do whatever you can on the capital raise in the 4 weeks with a negotiated compensation payout based on hitting certain milestones (legally documented of course). I can't imagine this guy would want to terminate your services midway and have to reengage someone else. No one likes to drag out fundraising. And 4 weeks isn't all that longer than 2 weeks.
IMO it's certainly a reasonable request to say "I am giving up double what you are paying me for almost a year if I don't do this for 6 more weeks", but he can say yes or no regardless of that.
I think it's perfectly reasonable for this to have slipped more than you could have anticipated 2.5 months ago.
How demanding is the capital raise work? Is it feasible for you to do it while you're working at the PE fund and still ramping up? Conversely, maybe offer to start working for them for free on a part time basis while you're finishing up (I view this as a show of good faith that you're not trying to jerk them around, but it could have the effect of cheapening your labor).
I feel like you are a mindreader. I have extensively thought about both those potential solutions. Where I come out is a) no it is not feasible to do both at the same time, except for maybe at the very end of the raise; and b) yes, I absolutely would proactively offer to work on a part-time basis, which is hard to do for a PE firm unless it's researching or sourcing, but I would offer and follow through if he agreed. I agree it is a really good sign of good faith so some of his concerns that I am jerking him around are allayed.
The issue is how I phrase it. I am thinking I have to phrase it as "I have a request, and if you say no I will accept it and our plan will stay the same. But I have an unusual opportunity that I would be crazy to dismiss out of hand. So could you respectfully please hear me out?"
I like your thoughts and suggestions. Thank you.
Don't bother hedging it by saying you would accept if he says no, just put your proposal out there, offering to work part time until the capital raise is done. If he says that isn't possible you can negotiate from there or accept it on the spot.
Assuming you get past the interview, the fact that they want you is the strongest leverage you would have in my approximation of things. If you're transparent in your situation and request, they should want to find some easy solution to accomodate you coming on board, especially on a somewhat concrete timeline.
UPDATE: The capital raise will now close end of June and the job is supposed to start mid-April. That would be a 2.5 month postponement. My dream of threading the needle is getting further and further away :( What do you guys think?
Under the same circumstances, I would try to take a long term holistic view of the situation and this may be the last chance to enter a PE shop for you. As much as it would hurt to walk away from that money, it would be in your best interest and your family’s interest to take that long-term income and build your skillset as an investor. Regardless, good luck!
I'm not a VP or a dad, but if I were in this scenario, I'd feel enormous pressure to take something that I'd know would provide for my family in a steady fashion over the long term.
Yea, I hear ya, but isn't that the definition of the rat race? I could, and frankly should, make $500k in the next 5 months if I stay with the capital raises. That provides for a long time. Not that I would wait a long time before trying to find a job.
Well, I could foresee the next 3 or 4 capital raises. Then what? What is an independent capital raising professional?
And it's not immediate. The fee would be in mid-June. Till then, I am barely scraping by.
But I hear you. 50% of me thinks I am INSANE to give up $500k over the next 5 months. This is the dilemma.
Seems like a major question that hasn’t been answered yet is “Why?”
Why are you in the position you’re in, and how does that impact what you should do going forward?
Were you laid off twice in 3 years because the funds failed, or because you underperformed? Are you able to help this contact raise capital because you have a great network and excel at capital raises, or is this unlikely to be duplicated?
Asking yourself why you’re here should help you better understand whether you could/should realistically make a long-term career in either PE or fund placement
Those are great questions. I was laid off twice in 3 years partly because the firms were not doing as well, and partly because of my own performance. If I was a rockstar, I would not have been laid off at either position. I believe I have learned from both of those and am better positioned to succeed in PE this time around. Also now I have a kid so that makes me more disciplined and focused at work, better able to grit through the tough times, knowing I have to provide for more than just me.
So, a big part of the position I am in is self-inflicted, and because I failed in PE twice. That is a factual statement. And that is why recruiting has been so hard for me the last several months.
I can help this guy raise capital simply because I have enough skills to do the modeling and presentation work that will attract investors. He has an investor network that I can tap into, he just is not skilled at modeling and thinking through the issues to present to investors. I am doing really good work, but at the same time his standards are pretty low. Any good 2nd year associate at investment bank would be doing the same level work. He doesn't know that and thinks I am God's gift to financial analysis and a model savant. Which is why he is eager to toss me 1-2 more for early and late summer.
It's a relatively easy gig. I have been scared to admit to myself that that should be part of the consideration, but it should be.
Personally, I would try to do both. First I would approach the PE firm and explain that you have a prior commitment with the capital raise, you thought it would wrap up sooner, etc. Any reputable PE professional will understand this. If they have an immediate need and cannot wait, perhaps there is a way for them to work with you to allow you to finish out the cap raise while you start working for them. There will be ramp up time at the new shop, plus hopefully if you're in later stages of diligence your time commitments will begin to decrease on the cap raise side. Best of luck to you man. I really feel for you.
Thank you. I have thought over and over about this. I think I could postpone 2 weeks no problem, and perhaps a month if I offer to work part-time during that time. 2+ months is pushing it so much, I can't see why he would not see that as a sign of bad faith and pull the offer. Even if he "gets" it that I need to finish the cap raise to get my success fee, he needs my help asap to help build his business and get deals done. Giving me a 2+ months more to do my cap raise would be an act of charity you rarely see on Wall Street. I guess if it's a big bank or firm with lots of people they can be more flexible on timing, but not when you are a small shop.
I would be amazed if this PE professional did not understand the situation you’re in. You explained it up front to them in interviews and, unfortunately, it’s taken a little longer than expected. Happens all the time in the finance world.
You are a single father with a lack of liquidity and an amazing chance to get $300k by postponing start date by 6 weeks. This isn’t a 24 y/o analyst, with no responsibilities, delaying 6 weeks for a 60k bonus (still big).
I would 100% explain your situation to them again. You have a good story. If they are hesitant, or worse, withdraw your offer, you likely dodged a bullet by not joining a toxic culture. Best of luck, man
I'd be curious if the below-market comp is an indicator of poor development / retention of talent, or cost pressures. If either / both, you could be in the same situation as with your previous two firms, and strike three isn't an option for you. Before accepting, you need to be 150% sure you will be put in a position to succeed.
Don't know your expenses, but assume that $500k could get you through the rest of 2019 / a good bit of 2020 -- plenty of time to find something else. You can position it in interviews as you decided to strike out on your own, had some success (pointing toward the two raises) but ultimately found that being an investment professional / working as part of a team was more satisfying. Plus who knows, if you're successful here you could easily market yourself to other entrepreneurs looking to do the same thing.
The below market comp is an indication of the size of the firm. But, the firm is growing and doing well, so 2020 would be more in-line comp-wise. But, that would mean I would not be fairly paid until December 2020.
You're right that $500k will last quite awhile, but at the same time, I struck out in recruiting big time. I can't imagine having to go through that again, and have to worry I experience the same hardship. Getting a good fulltime job, much less at a PE firm, would be in jeopardy.
Decisions like this are incredibly challenging. Your personal circumstance is incredibly challenging. My hat's off to you for how articulate you're able to be in describing and analyzing this situation.
I've raised for a business of my own that I started outside of a competitive day job (ill-advised for the legal complications it presents), for businesses in my portfolio that needed larger checks or different strategic capital than I could add, and have made a career of writing checks into companies that were raising or selling.
The most inevitable fact is that capital raises will always take longer than you want. I'm not sure how it went from six to eight to ten weeks while you've been making new comments in this thread, but that highlights the point I'm trying to make.
It seems that you have effectively no way to guarantee the timeline of your capital raise doesn't get continually shoved farther out. It seems like the desperation of your situation (and again, kudos to you for balancing it all: a firing, consistent networking and interviewing, and single parenting) may be blinding this fact a little bit.
I fully get how life-changing that dollar amount could be, how much weight would get lifted off your shoulders if that hit your bank account. I simply want to caution you that some guy who has no real skin in the game if this raise goes south (other than slower progress in that business) does not have complete incentive alignment with you. You have complete skin in the game: potentially losing what you identify as the last opportunity to re-enter the private equity industry.
Ever heard the joke about the bacon and egg breakfast? What's the difference between the chicken and the pig ... the chicken is involved, but the pig is committed.
Your cap raise client is the chicken and you're the pig. He could cut you loose today without paying you a dime (as you've already stated).
I'm usually not encouraging people to take the risk-averse path, but in this case you may be best advised to negotiate a start date slightly further out (four weeks, illustratively), spend that period of time figuring out how to restructure your time on the cap raise to a part-time (or at least nights-and-weekends) commitment, and try to get the cap raise done outside of your 9-5 hours at the buyout shop.
Good luck. This is a tough one. I'm impressed by what you've done in a tough situation, and I hope you can find a way to marry both outcomes in a way that works for you.
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