Quite Unconventional Background: Entrepreneur + M7 MBA to PE?
I realize how difficult it is to land a position in PE without i-banking or consulting experience, heck even with pre-MBA PE experience! But given that I have a very unique background I figured I'd ask anyway to see what your opinions are. There seems to be a tremendous amount of knowledge and collective wisdom on this forum and I hope to get some valuable advice and feedback.
I went to a top 10 school for undergrad and majored in Economics and Electrical Engineering. During my spare time in college I first did research on semiconductors and the study of "accelerating radical innovation" but later started enjoying economics a lot more and started an entrepreneurial venture. As soon as I graduated, I started a retailing venture and grew it into a regional chain of stores. Concurrently, being finance and deal oriented, I started venturing into real estate investments and advised and then later brokered a few transactions ($1M-$5M range) (retail had gotten slow during the recession and was basically on auto-pilot giving me time to do this).
I had learned pretty much everything I wanted to about finance from books and the internet but wanted to gain a quality education in strategy, marketing, and operations as well as gain a solid network so I started in the full-time program at an MBA business schools<br /> ">M7 b-school in 2013. Last summer, I interned at a top 5 tech firm that I had long admired in order to learn as much as I could about how it works. I also had a tech itch to scratch stemming from my background in engineering and I'm done with that now. After graduation, my plan is to use my research and analysis experience with real estate investments advisory, my operational experience in starting, growing, and running a chain of retail stores, and my MBA education to raise a small PE fund. I've received close to $2M in commitments already (far short of my goal of $10M, but I'm working on it).
However, for the first time in a long time, I'm scared of going out on my own and jumping into a huge investment. Perhaps it's because this will be my largest investment yet and I'm mostly using other people's money when before I've had at least a little skin in the game. Perhaps business school has taught me too much about risk and now I'm not foolish enough to just go do big things on my own. Granted, with my retail venture I've analyzed, valued, negotiated, financed, and acquired a chain even larger than mine and successfully integrated it but it was far simpler than what I might do now because it was simply an easy way to expand my business. It wasn't a pure stand-alone but rather a bolt-on acquisition in a business I knew a lot about (though still heavily leveraged).
Basically, due to my lack of experience in "real PE," I'm uncomfortable calling the shots and potentially losing big $$$ and/or potentially harming the jobs of dozens of people. But I am hoping that a PE firm would be comfortable enough with my candidacy because they'll see that, even though I don't have a traditional PE background, I have enough know-how, drive, real-world results--and, most importantly, that I'm humble enough--to be able to perform the duties of a post-MBA PE associate (due-diligence, research, modeling, evaluating, writing memos/presentations, managing deal process, etc.).
I realize I will be worked like a dog and not have any say in decision-making but, the way I look at it, there's no other way to really learn the business and get comfortable with it. I will be able to learn from the best and, hopefully, be able to move up within the firm. The other problem is that even if a PE firm believes that I can be a great PE associate, I think they may have trouble believing that I'll stick around for the long-run due to my entrepreneurial history.
I could abandon the idea of acquiring companies and just start acquiring larger pieces of real estate, which I'm \more comfortable with. But I'm more interested in businesses at this point and the capital I've raised is for non-real estate acquisitions. I could also join a club deal with an experienced firm and perhaps accept a lower return than the other firms in order to get my feet wet. Nevertheless, I'm thinking actually working at another PE firm is the best bet for me. Working with brilliant people is fun and invigorating as well which is something I missed out on as an entrepreneur but am thoroughly enjoying in b-school. The question is, how realistic is this for me? People tend to be comfortable with lower-risk decisions and although I may be an interesting candidate, I am probably way out of the ordinary and, therefore, have a higher perceived risk and, truthfully, probably even a higher real risk.
Any advice is greatly appreciated!
You never mentioned whether your retail biz was making any money or was acquired or whatever. General comment is that if you have created a legit business that generates compelling income/returns for you.... you should just keep doing that, and make it huge.
Regarding your own mini PE fund... at that size it really makes zero sense to actually raise a fund. As somebody with operating experience, I would recommend hanging your shingle as a retail-oriented, operationally-focused fundless sponsor. Go find a deal, then when you have it, call up one of the zillions of funded PE firms that has cash burning a hole in their pocket and have them finance the deal and complete the deal work.
If you are super excited about the idea of becoming a PE career slave, i'm sure you can find somebody who would take you on... i just don't know why you'd bother
Great comment RLC1!
Yes the retail biz was/is making money and I did want to grow it even further but realized that the economics of the business simply do not work for nationwide expansion. I still own it and since I started b-school I handed it over to my sister (who's really into retail) to manage/operate it. Ever since I realized I wouldn't be able to grow it further I lost interest in it. The only option to grow it further would be to franchise and I don't like the idea of that. I care(d) about the customer experience too much but I suppose if I'm not even going to be manage it anymore then why not think about franchising it?
I like the idea of pitching a deal to other funds. In fact, I've already found a deal (though it's a CPG manuf., not a retailer) and have been thinking of doing precisely that to "get my feet wet." This way I can do a deal, possibly with other experts, without having to risk my own money (or that of my investors), and not have to work for anyone either. Of course if I blow it up it won't help my reputation but it's better than doing it all on my own.
Bottom line is that even after my operational experience, deal-making experience, b-school, etc., I feel that I need a little bit of real day-to-day experience in a PE fund. I suppose the other option would be to befriend as many people in PE as possible and just learn from their experiences. In reality I suppose I just need to find a way to get my comfort level up for this.
Further comments and advice are appreciated!
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