Why work for a PE-backed company
I have recently re-launched my blog and newsletter where I post once a week with a longish (1000+ words) professionally edited piece of content. But sometimes I have stuff I write for friends that it makes sense to share more publicly. I’ve decided that is what I am going to us Medium for (as well as re-posting parts of the more professional pieces).
Here is some advice I recently gave to a friend considering a role at a PE-backed company:
Working for a PE company
- Generally I think, if you come in senior enough, this is the most consistent way to generate real wealth
- VC-backed companies are focused on going big or failing (75% will fail. Only 5% will do spectacularly well). The economics for investors is fine, but as an individual employee that’s a lot of beta. You can do a great job personally and fail through no fault of your own
- PE-backed companies are better on this measure. They generally try for a 0% failure rate. They don’t get the massive success of VC-backed, but they still shoot for 2–4x the value of the firm in 4–5 years.
- You won’t get the equity grant of a VC-backed company, but you could still get something significant. And it’s generally set up so your “strike price” is much lower than the current valuation of the company. So even if you don’t 2x the company, your options will still be worth something (unlike a publicly traded company). Unlike a VC-backed your salary will be higher as well
- That said, different PE-firms have different track records. And there is still a ton of variation. So you want to be at a company that will succeed. You also want to be senior enough that you get equity.
- The biggest value of doing it, is, if you succeed, you can parlay that into a role at another PE-backed company that is more senior, higher paid, and more equity. You can also afford to be more picky and do more diligence to find one that will succeed.
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