It's widely known that it is very difficult to make it past VP in PE. So what, in your experience or opinion, differentiates the people that actually make it past VP in PE?
Is it purely social skills? The ability to find good investments? Would love to hear your thoughts.
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Comments (21)
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Solid relationships with both those above and below you. Knowing how to play the politics. Some luck
1. External relationships and deal sourcing
2. Luck: right place, right time, right fund
3. Hierarchical structure within firm
All these provided a qualifying level of competence.
Bring in deal, close them, and have them perform well.
continously be able to bend over and take it
Office politics are so important, especially at larger organizations. It's actually a shame. Have to be able to "play the game"
1. Performance. This means high quality DD, proactive management of portcos, strong returns/portco performance, and starting to build circle of competence to source and close good investments.
2. Think like an investor/owner. Associates/VPs do deals to build resume. High returns are your resume as a Principal/MD. The best VPs already think like Principals/MDs in this regard.
3. Be part of growing organization. Senior PE seats are sparse and they only open at growing firms/funds.
4. Some luck involved. As is true with any senior level promotion across industries, there is going to be some luck involved with timing, relationships, macro, etc.
All important, but number four is probably the most relevant. As much as it may suck, sometimes people just get unlucky. Individuals in this industry will play favorites, shift workloads, and make decisions based on emotion rather than logistical output. You may find yourself having conversations with Partners, being exposed to investors leaving them with good impressions, or anything in between. May not matter at the moment, but five years later - boom.
Now, luck won't matter at all if someone doesn't have the first three things you listed. I think those first three are the baseline minimum, and number four is the kicker that will really push certain players over the edge. Time is also a factor - unless someone is pigeonholed (in which case they should leave the group), eventually, that promotion will come around. Put in good work for long enough and the luck will even itself out. Now, whether an individual is up for the lengthy process is a personal decision, which I think is the biggest reason why so many folks don't make the 'cut' from VP -> Principal/Director. They grind their way up the totem pole, working their ass off as a VP5+ for years until eventually, another opportunity arises. That opportunity is better, and suddenly their life in the PE space is done.
That's not a bad thing either. PE is usually not an end-all for a lot of folks, regardless of what their ambitions may seem like now. Transitioning out of the space into Corp Strat or upper management of other companies seems to be a pretty large chunk of people who are in this space. As for me personally, I'd kind of imagine something similar. I truly don't know if I'll ever make MD, nor am I sure that I want to. I am happy where I am now, and will continue to put in good work, but if another opportunity arises that's better for my family and me, then my work in this space is done. It's just personal preference.
Great original comment, fcf_yield. Good stuff.
You drop banger after banger. +SB
I think at large UMM and MF sourcing is way less important than execution maybe there are some small exceptions but let's be real
This has actually been an issue at a lot of MFs now that sponsor to sponsor deals have been drying up. All these mid level PE professionals have no reps sourcing outside of traditional channels.
I think those funds are doing a disservice to their LPs if sourcing is less important than execution at that level...
I don't think it's 'less important' - but different in nature. Fewer assets so analysis / execution more important, contrast to MM where its about 'hustling' for deals and thus more time (volume) needed for sourcing.
I have to agree with this. I've spent some time in both a LMM fund and a UMM/MF fund. I definitely felt like with the LMM fund I had to hustle a lot harder in terms of sourcing and relationship building, which I was pretty good at and enjoyed despite the pressure of it. Even when it comes to banked deals, you still need to get close with the bankers, closer than other sponsors at least because it is such a crowded space at that size of the market. At the large end of PE, I've found that sourcing is less critical. This is because there are far fewer competitors - like there's only so many PE firms that are going to chase a $2.5bn building products deal for example and the bankers that cover the space (usually bulge brackets + a few elite boutiques) know who those firms are. It is exceptionally rare to find a proprietary deal at this size, everyone is a fiduciary and everything is super banked. But still, having ins with industry execs for diligence, and things like that are really important.
A man that has clearly actually done the job. Agree.
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