Lateral or B-School?

Hi all,

I'm currently an associate going into his 3rd year at a MF in NY. I'm starting to think of next steps and am curious to hear the thought process of those who were on a "partner" track role who decided to go to B-School instead. What pros and cons did you weigh in making the decision? Did you have an end goal in mind going in? Additionally, did you consider lateraling to another fund instead to move up the ladder faster?

Being presented with a good shot at HSW coming from the MF name vs. lateralling to a lessor known MMPE shop in a lower COL city (slightly higher pay, sr. associate title, almost half of the COL as NYC, and lower tax). Hate to throw away a shot at HSW but also recognize that really great opportunities are hard to come by sometimes.

 
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One major factor in your decision should be the type of place you hope to end up in the long run. Do you want to be a General Partner, or are you comfortable being a partner but not part of the GP entity?

If the former, you're going to be prominently featured in all marketing materials and involved in the fundraising and investor relations process. That isn't to say you're going to be traveling 250 days a year like Rubenstein was for almost the last decade of his career, but you'll be interacting with the biggest LPs in your fund(s).

If the latter, you're a deal guy and almost exclusively so. You source, diligence, and manage companies in the portfolio. You interface with internal staff, deal counterparts, service providers, and portfolio company executives.

For the former, the MBA does add value. There's an entire swath of the universe that thinks paper from Harvard or Stanford says so much about you that they can lean heavily on it when assessing you as opposed to taking the time to assess you on your own merits. Classic signaling effect.

It also is helpful in the fact that most rooms you're walking into will have someone first or second-degree from you through the business school grapevine. Meeting OMERS for your firm's Fund VII raise? They're already in Fund V and VI so it isn't a cold meeting, but you shoot a classmate an email and he decides to sit in on the meeting. Now you have a friendly involved in all the ensuing internal conversations after the meeting. Trying to expand the geographical base of your LPs and searching for a meeting with Temasek? You probably have a classmate there, and if not a classmate, a couple weeks of phone calls and emails across your class yields you a second-degree intro.

For the latter, the value is probably lower. You'll meet a ton of great people and those people will offer you similar value as described above, but it isn't core to your day-to-day job function.

For people coming from and returning to 'high finance' trajectories, this is by and large the whole point of business school. Developing a network that will:

  • grant you access to any boardroom you need to get into
  • yield deal flow
  • provide a platform for the narrow tranche of even more elite recruiting opportunities you may not be able to easily identify or open the door to while cranking in your current 80-hour-weekly seat

Let's make an example.

If you're planning on making a career of it at Apollo, an MBA isn't going to deliver top-notch value because you aren't going to be in a position where it benefits your daily life:

  • you aren't involved in fundraising because the firm has such a robust IR apparatus that the only time 'investment professionals' are involved is when C-level people on the LP side need to enjoy some face time
  • you don't have any deal flow issues because the prominence of Apollo's name and platform speaks for itself ... and this shows up as 90-hour weeks
  • you're paid really well, and as long as you're okay with the challenging lifestyle, you aren't looking for other career opportunities; when you do decide to look, the Apollo name means you can interview just about any place you want

If you're planning on making a career of it at a Madison Dearborn or FFL or similar type place, an MBA does move the needle for you because it does benefit your daily life:

  • you are involved in fundraising; you aren't a $100b+ firm with several dozen people in the IR function, so while you don't manage logistics, you do spend a non-trivial portion of your overall time in contact with current or prospective LPs
  • your firm focuses on a specific geography or industry, and there are bigger players who can out-muscle you on good deals; you want every leverage point possible for sourcing or closing transactions
  • the companies you interact with are the middle or lower middle market, so the executives aren't guys with pedigreed backgrounds; an HBS or GSB degree adds some cachet to your name

Overall this is not an ironclad rule, but I hope it's a helpful framework for you to think about.

Lastly, I'd point out that while this current opportunity you're weighing may indeed be great, you shouldn't operate from a scarcity mindset. If you're worth this seat, you're worth another like it or better, and it'll probably manifest itself for you.

I made another comment to similar effect in a different thread:

APAE:
Conor McGregor:
From your perspective, would you say people that you've seen commit fully to the two strategies/paths you listed eventually make it to at least some sort of fund or buy-side role through pure endurance/persistence.
I can't really comment on that at all. I will say that people tend to end up largely where they belong. If you're truly smart, competent (quantitatively and qualitatively), and willing to put in the work, over time you will end up in the outcome "band" you belong in.

I can't take credit for this idea. Some other user on here described it well. Long story short, you can't guarantee that you'll get to be partner at KKR, but if you deserve a senior role at a good private equity shop, it'll happen for you over time. If the best you can get is a senior corpfin analyst (not a manager), well, that's where you're going to end up and stagnate.

If you have what it takes (and that includes grit, as Angela Duckworth has researched so powerfully), you will get successively closer to what you want.

I can't give you a directional answer on this because I don't know your end goal. Put some effort into defining that end goal and your decision will become easier.

Do this by talking to as many different people as you can in the two respective types of places I outlined. People love to talk about themselves. You can legitimately cold email partners at shops all across the country to ask about this: why or why didn't they get an MBA, and how did it color their experience.

(Note that you'll want to get people who graduated this millennium. Business school was a relative joke all the way through the 80s. I'm not dogging anyone with this; I was surprised to find that everyone who graduated from the schools everyone worships today [HSW, for instance] spoke unanimously about how easy it was to get in and while they were there. Then I looked up the admission statistics and laughed; it was north of 40% for awhile. People were applying with no work experience and no standardized test and getting into Harvard off the strength of a recommendation letter (social status) and caliber of undergrad. A lot of guys I've spoken to in their 70s or 80s are open about the fact that they couldn't get in today if they applied with the young guys they're currently writing rec letters for.)

One indirect upside is you'll develop a lot of relationships you wouldn't have otherwise had. The direct benefit is that you'll get a lot of clarity on how different people have chosen their career path.

Good luck either way.

I am permanently behind on PMs, it's not personal.
 

I am in a similar position, though coming from an NYC MM which changes the complexion here. The new lateral market that opened up 5-10 years ago has really changed this answer significantly. My senior VPs are amazed that people can now forego business school and just lateral instead - it used to be a necessity to move up in PE. This is something to keep in mind for your conversations.

It goes without saying that as always APAE has hit the nail on the head.

My current thinking (from reading WSO religiously, taking in comp/market trends, and conversations with fellow professionals) is that:

-MF professionals basically always nail H/S. They can go, and should usually go

-Solid MM professionals are CRAZY to pay full sticker at a lesser MBA business schools">M7, but should definitely go to H/S. Wharton is a solid maybe.

-Weaker LMM professionals, it probably makes sense to go to MBA business schools">M7

I'm applying for MBAs now and would go to H or S, would maybe go to W, and would not go anywhere else without major $$. I'm running at other opportunities (in PE & elsewhere) simultaneously for myself in case it doesn't work out -- the answer should be obvious if I get into H, S, or nowhere - if Wharton is the only school I get into, the answer will be less obvious. I think APAE has written previously about the growing divide between H/S and Wharton.

Less relevant to this thread, but I think a full-ride at an outsider top 10 would be really interesting for someone who has saved up a lot and wants to leave PE. You can still land $200k / year positions that are far closer to 9-5 out of an Anderson, Cornell, etc. I think a lot about early retirement and if you can keep your $300-$400k savings, take a scholarship, get a (weak) credential, and exit to that type of easier job -- you'd be well on your way. Less relevant to this thread specifically given you seem to like PE.

 

At the mid-senior to senior levels in smaller or regional shops , positions are filled primarily through immediate networks rather than through search firms. Begin cultivating your network:

  • Start attending industry conferences, both for private equity and for whatever industry your fund focuses on (if any).

  • If any of your firm's exited investments were bought by another sponsor, look at those firms and find a way to connect with employees there. (You could do it just like college students trying to find some overlap with someone in banking during OCR, or it could be as simple as "Hey, I'm at So-and-So Capital and found some old deal info on X-and-Such Company we sold to you back in 2011. I'd love to hear how things have progressed with the business.")

  • Buy LinkedIn Premium and do advanced searches to find classmates from whatever schools you've gone to who are now in the industry. A short note to reconnect with someone from years ago is usually received well, and you can spend a year or two redeveloping that relationship as adults before floating the idea for general career advice or a specific ask.

In short, work today to develop a broad set of relationships that can help you a few years down the line. You should be doing that anyway; that's the way to move faster than all your peers. I've just outlined how to do it for job changes. You should also be doing the exact same thing for sourcing, for professional service providers, etc.

The guy who knows the most people and can tap a warm, healthy relationship to present the exact solution necessary is always the guy who wins.

I am permanently behind on PMs, it's not personal.

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