How much is the ability to invest in deals at a job worth?
So I just got a job offer where a big perk they were touting is the ability to invest in deals with no splits, return hurdles for a preferred equity investor, or anything of that nature. These are smaller deals with exceptional returns, atleast 50% returns per year according to them. No maximum or minimums to invest. Other details are a 6% increase in salary and a 10% discretionary bonus
My current job has a salary of 90k and the bonus is structured as a percentage of developer fees on closed projects, estimating that to be somewhere around 35k a year this year.
Basically, would this be worth making a switch, financially speaking?
Some other background, my current company's principals are nearing retirement and I have no clue what will happen to the firm. They do flashier and cooler projects but are way more disorganized and somewhat reckless with how they do things.
Based on the most helpful WSO content, here are some key points to consider when evaluating the financial worth of the ability to invest in deals at a new job:
Investment Opportunity:
Salary and Bonus Comparison:
Long-term Stability:
Work Environment:
Financial Comparison:
Current Job:
New Job:
Potential Investment Returns:
Conclusion:
Ultimately, the decision should weigh the immediate financial comparison against the potential long-term benefits and stability offered by the new job.
Sources: Very happy at current job; does it still make sense to switch?, Should I leave IB?, From BO to FO and back again, or, how I learned to stop worrying and love technology, No bonus/payrise despite good year, When to jump - Advice on switching jobs, careers, and fields
future/advancement at the new shop sounds risky on top of the lower initial comp. Have they shown you backend of these 50% returns on recent deals? Assuming that's LIRR looking back after an aggressive waterfall and a good capital event at the end of the deal?
Initial guaranteed comp is higher, 6% raise and 10% bonus.
The workplace comments were related to my current job, new job is more stable with a better long term outlook with leadership, product type.
The incentive structure is really the difference. Basically a decent chunk of fee at current job vs. getting the upside of deals by coinvesting at the new job.
I have documentation on the returns and it's legitimate. Yes your assumptions are correct on leverage, waterfall, and sale.
Depends on the incentive structure LP/GP/LP without fees etc.
From what I've been told my equity would be the same as any institutional investors/the partners of the firm. No splits or fees or anything.
I wouldn’t say this is a big perk, if anything, you’re helping them by reducing their equity check. Not to mention you now have skin in the game and will inherently work harder.
There’s also diversification to think about. If the firm goes belly up, you’re now down a job and you’ve also burned a ton of your own money.
Not saying you shouldn’t take the job, but things to think about. It seems like they’re upselling this “perk”.
Definitely understand that perspective. As far as weighing out comp, would you assign value to the ability to invest in the deals? Cause if not, it would be a big pay cut.
50%….good luck
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