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Unglamorous jobs often pay more
Titles versus paychecks
An associate at KKR has a title that people in New York recognize at once. An account executive at Cognition, one of the hottest AI coding companies, spends the day slinging software to random tech companies, and depending on on-target earnings might have pulled between $500,000 and a million dollars after joining a couple of years ago. Sales gets relabeled go to market because few graduates of schools like Yale will say they do sales.
Starting early at Ramp
Sam Buck spent a couple of years at Goldman, then joined Ramp early as basically an SDR, when it was a Series A company that few people had heard of. He is now a high-ranking VP or exec there, and that is before counting equity, with commissions along the way.
Where the money arrives
Much of private equity compensation is back-loaded into carried interest, and funds keep raising continuation funds to keep the game alive, so whether any carry ever arrives after eight years depends on portfolio marks that can be unrealistic. Boring work follows the same pattern. An accountant who carves out a niche in taxes and estate planning and moves up to clients with higher and higher net worth finds there is so much money to be made.
Why is private equity pay back-loaded?
Carried interest is the share of a fund's profits that goes to its managers, traditionally 20 percent, and it is paid only after investors have gotten their capital back. Profits are realized when portfolio companies are sold, which usually happens years after the fund invests. Funds are typically structured to last around ten years. A manager's largest paycheck therefore arrives long after the work of buying the companies.
How do continuation funds change when carry arrives?
In a continuation fund deal, a firm sells one or more companies from an older fund into a new vehicle that it also manages. Investors in the older fund can cash out at the agreed price or roll their stake into the new vehicle. Selling at that price can let the firm realize carried interest on the older fund's gains sooner than a sale to an outside buyer would. The market for these deals grew quickly after 2020.
What does on-target earnings actually measure?
On-target earnings, or OTE, is a sales role's base salary plus the commission paid if the salesperson hits their quota. Quotas are set as a share of revenue the company expects each seller to bring in, so commissions rise with the sales that the company books. Many startups pair OTE with stock options, which add value if the company's valuation rises. The number describes a plan for a typical year, not a guarantee.
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