This applies primarily to LMM PE guys.
What would it take for you to jump ship from where you're at now and join the operating side of things for a company with sub $10M in revenue in an executive role?
Specifically looking to figure out a range for:
-Base
-Equity
-Bonus structure
-Any additional benefits that would appeal to you. IE no real need to suit up daily.
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for me, I never found PE to be some sort of promised land. I'm not so thrilled with sitting back and just evaluating deal after deal. I'd gladly join a tech company and build something. It would take equity, a decent salary (of course, less than what I get in PE) and the chance to get in and build something cool.
What attracts you to tech specifically? Would you be open to other industries like newer consumer brands akin to Bonobos?
tech and healthcare-related tech push society forward, and in most cases add social value and solve problems. I like how tech always has a new-new-thing, so it's intellectually compelling
Not in PE but here are my thoughts. Equity - depends on the business, ie growing one? Or stable one with high margins putting out $1M in dividends? Bonus structure - make sure targets can be quantified, you don't want some qualitative bullshit to impact your bonus, are you given PnL? If yes define the target.
Good call, I'll update OP with more information shortly but let's assume the asset is growing at 1.5x a year before you're installed.
Well, do you see the growth keeping this pace in the future? ie is the market a niche where you will be soon limited? Is there potential to accelerate growth with more capital? ie be back by some PE guys after a year or 2? allowing you to partially cash out some of your equity with a good return.
Assuming you are targeting (senior) associates and VPs, your offer should consider what is the current comp of the person and his ambition. I mean, a (senior) associate is likely not earning (or has just started to earn) carry and hence he sees carry as 'the thing' that will make him rich. So the idea of Equity is perhaps extremely attractive as it works as carry in the mind of the guy. In this case, you can give him a base that let him live comfortably, a few 10k of bonus and a few % of equity. For a VP, who has already understood the limit of carry (it takes a lot to vest and even more to end up in your pockets), you can achieve more emphasising a bonus tied to bottom line performances (not really different respect to a dividend) with just something that allows him to pocket some value in case the business is sold. As for the additional benefits, it really depends on the guy (car/gym/membership).
If I were you, however, I wouldn't try to lure someone on the basis of money. The only way to make sure he both does his best and stays with you for a reasonably long time is that he's motivated to switch from PE to executive role and that he really believes this makes sense on a long term perspective in his career path.
Great points! Asked about the other benefits in the OP as well to find out exactly what else might appeal to ex-PE guys. IE the ability to work from home 95% of the time?
working from home is meh for me. Kid running between my legs, can't get sh*t done.
I prioritize learning and working on cool deals above all else.
Any specific things you like learning on and what makes for a cool deal?
I’ll throw my two cents in from the perspective of an associate.
If you are looking for an associate, I think you try to get somebody approaching the end of their second year.
Any first year who is going to jump at a steep discount is likely somebody who is burnt out and just wants out of the grind or someone who is realizing they aren’t going to cut it in PE. I think you could get someone here with a lighter package, but I’m guessing this isn’t the PE type you are looking to atttact.
If I’m a second year associate, whether I want to go the bschool route or I want a direct promote, I might be tempted by an opportunity with a company that I think has real potential, a real team to work with, and a more meaningful pie out of the gate. Key here is that any opportunity this size is a candidate to fail, no matter how bullet proof it might look. The post-2 year candidate can always default back to b school with the pitch I did my two years in PE and loved it, wanted some operating experience before bschool and then back to PE. If I’m off to a strong start in PE, and see myself with a bright career in front of me, this is still an alternative path I can take and not kill my original window if it doesn’t work out.
Depending on how I feel about the opportunity, I think the ballpark is 150k+ cash and meaningful equity on top. In terms of other perks, I think your demographic here is going to see through any of the fluff bullshit like gym membership. If I just went through the IB to PE ringer, all I care about is cash / equity and free time / ability to do shit that I haven’t been able to do for 4+ years. I think the work from home option is always nice and could be a plus for most of the people you’re going after. Otherwise what’s important to who is very personal. I’d love work from anywhere + travel type of package to give me freedom to travel and incentivize me to use it, but that’s just me, and that’s also why I wouldn’t go around marketing this as the package. Cash + equity + free time is king.
Thanks for your insight!
Agree with all of this, I pretty much have the same mindset.
Bump.
I've thought about this a lot given I work at a LMM/MM PE that has a record of placing people into ops roles if they want.
Probably at a minimum 150K + 10/20% Bonus + Meaningful equity(1/2%+). And in a lower COL city with a decent lifestyle.
As far as role goes, I think truthfully its hard put and mid to late 20s into a C suite role. Truthfully, based on what I see what our portco management has to deal with, it's probably not something I could even handle, and I have a pretty high confidence level when it comes to by work/business capabilities. The role would probably have to be a Director/VP level role focused on finance or ops.
For the most part I out-earn the CEOs at our businesses, so it wouldn't be a pure money thing. The fun of it would be to gain great operating experience in a role with a strong title that could prepare you for a bigger ops role down the line (C-Suite) if needed. It also just lends credibility when talking about operation improvements with new or potential portcos.
I would do it for the c-suite title alone, regardless of pay as long as I had HIGH conviction the company will be sold/IPO in the next couple of years. Rationale is that if you're a young person with a high level title, people will doubt you regardless but if it had a successful outcome, people will overlook your age.
I hate the idea of "paying my dues" in years though and I would think the strategy above would let me skip a lot of that if it pans out
No experience, but in what types of situations would these types of ops roles become available to PE professionals? Do PE associates even have the relevant operational skills to be effective in the c-suite? Seems like most PE firms prefer to choose outside management teams for a reason.
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