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I have a potential opportunity in VC/PE but would have to take a significant pay cut for 2 years. Is giving up salary for 2 years worth the potential and equity opportunity down the road?

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Talking a 25-30% cut

Personally I wouldn’t (but depends where you are now)

I was in a similar situation a few months ago. Ultimately, I decided to stay in consulting for now, as I’m pretty risk adverse, and there is significant risk in joining a start-up. Per some HBS material I got my hands on, written by Shikhar Ghosh, about 75% of start-ups fail, and of those that are successful, only a small percentage IPO. In my case, taking a 6-figure paycut now for a 25% chance at a 7 figure payout in 4-10 years didn’t make sense. However, if you’re early in your career, can afford the 25% pay cut, and you’re willing to bet on this company, then it make sense…

I thought the whole point of VC/PE was to get paid? What does your TC look like after those years and how guaranteed is that?

Not worth it, unless it’s with a with a big MM/MF. Even then, you have to ask yourself what what the career progression may look like. If it’s a new fund with guys coming from a blue chip PE fund with a proven track record and have most of the equity circled from LPs, then may be a good idea to get in on the ground floor and in a couple of years you may start participating in some form of carry. But, it’s the second and third fund where you will start to see real economics , assuming you are at a principal/jr partner level

Let me add this, if this PE/VC is busy doing deals, have a good track record, and a good reputation, 25% -30% haircut on TC in your first year shouldn’t be a deal breaker. Again, it boils down to the PE group, not all PE groups are the same from performance perspective. Why is performance important? Because it lets them raise subsequent funds from LPs. So, take a longer term view, if you decide to make this change.

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