Why GP Staking Can Hurt You Long-Term
“That 20 or 30% ownership ends up being a lot more that you're paying out over the life of the firm if it all goes well.”
Transcript
We try to make that pretty flexible and affordable. With a GP stake, alternatively, you say, okay, I'm going to sell maybe 20 or 30% of this company, which today is maybe you started the company. It's maybe not worth anything, and so that feels cheap. But hopefully, you're
going to be really successful. Your firm is going to grow. You're going to have multiple funds. You're going to be bringing in management fees, and then your investments are going to pay off. You're going to hit some home runs, you're going to have some rocket ships, and then you'll start earning carry on those funds.
And so the pool of assets that the management company is entitled to is going to grow over time. And so that 20 or 30% ownership ends up being a lot more that you're paying out over the life