Rec Letters to Launch PE Firm

At the last step of launching a modest PE fund and one small thing threatens to torpedo the whole thing... two recommendation letters requested by the CIO of the lead institutional investor. 

To get to where I am (especially at a relatively young age) took a lot of ball busting and bridge burning. I've literally taken away clients from past MDs/bosses. I'll be the first to admit I'm not the brightest, sharpest, or hardest working guy. Good enough? Lucky enough? Sure. 
 

I have everything that investors would look for-- top undergrad, MBA, 10+ years of experience and network, willingness to think outside the box, scrappiness etc. The only thing standing in between me and "2/20" are two recommenders (i.e. ex-bosses or people that can speak to my professional talent, ambitions, work ethic, etc.). 

If anyone has any suggestions, I'm ready to give away all my silver bananas. 
 

-Screwed Chimp

Comments (51)

  • VP in IB - Gen
Dec 13, 2021 - 8:36pm

Thanks for the reply. Did my MBA 6 years ago in the east coast, now I'm based in the south.

I didn't think I would need anything from grad school professors, so never put any effort in building relationships with them. 

With that being said, the lead investor is looking for "professional" recommenders as opposed to academic.

Dec 14, 2021 - 12:01am
WestCoastMonkeyMan, what's your opinion? Comment below:

Makes a ton of sense, not sure I have anything else to add. Good luck with the fund, sounds like a really cool opportunity to get off the beaten path... hope to do my own thing one day

  • Intern in Research - Other
Dec 13, 2021 - 9:10pm

I'll write you one if I can get an internship

  • Intern in IB-M&A
Dec 13, 2021 - 9:12pm

Can't help  you but if you succeed, could you possibly make a thread explaining your general strategy? There are so many PE firms looking at the same deals these days that it'd be interesting to know how you intend to differentiate yourself.

Dec 13, 2021 - 10:13pm
PE-biz-dev, what's your opinion? Comment below:

Ask ex-portco execs you worked with. They can hopefully speak to your ability to win deals and add value as well. 

If any LPs ask why you don't have other PE guys on there just say it's a competitive market and you're looking at similar deals and didn't want to put those people in an awkward position. Be advised they will probably try to back channel to your old fund either way 

  • VP in PE - LBOs
Dec 13, 2021 - 11:34pm

I often get reference calls for my pre-MBA fund (~7 investment professionals through my time there). Any former associates who would say nice things about you?

You know this, of course, but on the off-chance some pre-MBA as dumb as I was stumbles upon this thread: DO NOT BURN BRIDGES. Life is short and the world is unbelievably small.

Edit: Second poster above who recommended portco execs.

Most Helpful
Dec 14, 2021 - 12:35am
APAE, what's your opinion? Comment below:

This sucks. It's a short-sighted ask on their part for the obvious reason that an entrepreneurial person by default is likely to have been a 'bad' employee because they were always focused on getting to the point they could do their own thing.

Get the partner at the law firm repping you to be one. Find someone who ran a company you sat on the board of when you worked at a prior fund. If you did any deals as an independent sponsor, get the people who wrote checks. If you oversaw tuck-in deals for a portfolio company of a prior employer, get the senior banker(s) who advised your firm (or better, the seller). Get someone from your analyst class who stayed in banking for the vertical promote; have an honest conversation that this can springboard your career and you won't ever forget it. Get the lenders you interacted with on behalf of portfolio companies or prospective acquisitions you never closed on.

Don't think conventionally here. They're looking to hear that (a) you're not a scumbag and (b) you know how the private equity game works. There are a lot of people who can weigh in on that. Someone who observed your deal acumen and process is going to be able to say a lot of the things an on-list reference should.

You're never going to be able to provide the cookie-cutter thing they're looking for with two people who were direct managers of yours at your two most recent employers. So you should round up a roster like outlined above and come back with four to six. Try to compensate with volume, and put it all in an aesthetically formatted PDF with a paragraph of context for each person you list.

Where things are out of your control are the off-list references. The people you worked for and with are for sure gonna get a call. 

Younger folks, as everyone else here has said, don't burn bridges. It's way smaller a world than you can imagine.

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

  • 27
  • VP in IB - Gen
Dec 14, 2021 - 10:03am

This is an excellent answer. I may just print this out and include with my TBD rec letters. 

Regarding burning bridges, it's hard not to do if you're driven and ambitious. A lot of these old fart, boomer MDs probably still think I haven't "paid my dues yet" or "I haven't suffered like they had to." When it comes to mid-level people (my rank), they reek of envy, insecurity and pettiness that I'm attempting to start my own fund while they're getting sodomized.

Newsflash: I'm not waiting til 60 to do this shit. 

Dec 14, 2021 - 10:56am
harveyspankster, what's your opinion? Comment below:

It's not that you're doing it that rubs people the wrong way, it's the attitude. That's unfortunately the problem with ambitious / driven folk, they don't only focus their energy on getting what they want to do done, they have this burning itch to rub it in everyone's face and prove that they're right. And that attitude breeds resentment and burns bridges.

Like you wrote a post here soliciting advice because you were in a corner and the moment someone threw you a lifeline you just turned around and took a massive dump on ex-colleagues and bosses. That's the problem right there. This is a nice quote to keep in mind "The error of youth is to believe that intelligence is a substitute for experience, while the error of age is to believe experience is a substitute for intelligence."

Best of luck in your future endeavors but develop that humility muscle. It will serve you well. You keep rubbing people the wrong way, you won't be able to source deals, or recruit top talent. Learn to be a bit subservient, but then fundraising will teach you that :)

“Self-control is strength. Right thought is mastery. Calmness is power. ” - James Allen
  • 19
Dec 14, 2021 - 2:47pm
APAE, what's your opinion? Comment below:

This comment is very valuable, harveyspankster

It's something I struggled with. I never had a burning itch, and I never intentionally rubbed it in people's face any time I was more right or more smart or more hardworking, but I failed to make sure that I didn't

(That learning was a breakthrough similar to one that's valuable in dating, family, or other intimate relationships. "I did not intend to hurt you" isn't enough, you have to work on your mindset such that the statement "I intend not to hurt you" is true and manifests in your words and behavior.)

I'm fortunate that someone wiser pulled me aside in my early 20s to counsel me on how ambition can be perceived.

harveyspankster is highlighting something I was trying to point out delicately. Off-list references are something you can't control, and reputation is how people speak about your character when you're not in the room. 

You're right that innumerable people will bristle if they see you doing something they wish they had the stomach for but know they don't. I landed on the goal of making sure that whatever bad taste someone has comes solely from the well of their own mind, not from anything I did to aggravate it or make things rankle worse.

James Allen (the author of the quote in his signature) is very worth reading. "As a Man Thinketh" is the single book I most frequently recommend.

Good luck. Having your own fund is immensely freeing, but it's also very heavy, the sense of responsibility is profound and there are always limitless more things you could do at any moment of any day.

Also, remember that just like this position grants you new freedom in the professional arena, you have similar freedom to choose how you reflect, develop, and grow as a person as well.

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

  • 9
Dec 14, 2021 - 2:49pm
APAE, what's your opinion? Comment below:

That's remarkably kind of you to say. 

Is there anything I can help you with, or something to think through? Message me if there is.

I hope you're enjoying the quieter part of the year, and if you're fortunate to have them in your life, the time with people who matter most to you.

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

  • 1
  • Principal in PE - LBOs
Jan 7, 2022 - 12:10pm

Lol, it's short sighted for an institution investor allocating millions of dollars to OP to manage/deploy at his discretion to check references on OP? Or is it short sighted for OP to conduct himself in a way where across a decade plus of professional experience there's not a single person he can find to vouch for him?!

Theres tons of entrepreneurial/ambitious people who have built a track record where people that have worked/dealt with them are happy to be repeat customers or at the very least would want to give a rec to get in said person's good graces. It's telling OP doesn't qualify for either.

Theres people that are rough around the edges, dicks, overly demanding/gruff/aggressive etc and still have built up real professional goodwill.

Dec 14, 2021 - 10:14am
Anon1254, what's your opinion? Comment below:

Can relate to the hustling / bridge burning elements you alluded to and I've been in similar situations. 

- Try to tap co-workers that you had great rapport with at previous firms / that you still consider to be friends or that you're friendly with

- Do you have a mentor(s)? Hit them up and ask them for a LOR

- To the points above, anyone that's written you a check / you've made money for is a great LOR along with PortCos

- Any undergrad/MBA clubs you were a part of/anyone that you still keep in touch with that's "made it"? 

- Any family friends that have ancillary connections to Finance? You can make the case that they've likely known your character for quite some time and can attest to who you are as an individual

Hope this helps.

Array

  • 4
Dec 14, 2021 - 4:28pm
NoEquityResearch, what's your opinion? Comment below:

Wow 10+ years in the business and you can't get two decent recommendation letters. Red flag!

Good thing that they're asking.....we all sometimes rub people the wrong way in the climb to the top but they're not asking for 20 recommendation letters....just two....and you can't make it happen???  I wouldn't give you any money either. Don't care about your track record.

  • Principal in PE - LBOs
Jan 7, 2022 - 12:17pm
NoEquityResearch

Wow 10+ years in the business and you can't get two decent recommendation letters. Red flag!

Good thing that they're asking.....we all sometimes rub people the wrong way in the climb to the top but they're not asking for 20 recommendation letters....just two....and you can't make it happen???  I wouldn't give you any money either. Don't care about your track record.

For the record, if your track record is good enough, you'll get money even if you're a dick/sketchy. Eg Apollo, SAC Capital, Maple Lane, Platinum Equity, et al.

Seems like OP thinks he has fuck you money talent but actually doesn't, and is now (not) realizing that he actually never had the bank balance to be dropping FUs left and right.

There's a saying that goes "why bother having Fuck You money if you can't say Fuck You." Also goes the other way, don't go around acting like a big swinging dick and saying fuck you, if you don't actually have the talent to back it up.

Dec 14, 2021 - 4:35pm
m_1, what's your opinion? Comment below:

I don't agree at all that being ambitious results in burnt bridges.

We are a small independent sponsor but most of my LPs are repeat investors and ex-business partners or people I've worked with in some capacity. My most consistent LPs are guys that I founded companies with but left because I felt they were moving too slowly. If you do so with tact and are careful to ensure everything is smooth for them when you depart, there should be no hard feelings at all. 

If you look at the founding of many of today's top hedge funds, private equity firms, etc... the seed capital comes from people the founder used to work for. 

Personally, there are people on our team I would gladly invest with if they left and I would do so without asking much about the new venture. I think it's a big red flag you've been doing this for a while and have precisely 0 references. After interviewing hundreds of people since 2019, I have not run into a single top tier piece of talent that was unable to produce a positive reference at the senior level. A lot of successful companies follow the TopGrading methodology when hiring, and there's a reason the book stresses their reference methodology...because it works.

  • Principal in RE - Comm
Dec 15, 2021 - 2:46am

I'm glad you learned now... burning bridges is a dick move. It shows one's character. I'm happy you understand the importance of empathy. 
Like the saying goes.... Karma's a bitch ain't it... 

You must have some people in the industry who like you... Worst case.... just get someone at your previous firms to sign the letter for a favour (IOU) you'll do (ie. You scratch mine, I'll scratch your back). 

I built my own firm off the backbone of good relationships. It's because of my amazing relationship with people was I able to build my firm and sell it later. 
Now I'm a PE investor with my own capital. 

  • 3
  • Analyst 2 in PE - LBOs
Dec 15, 2021 - 8:56am

Ask some of those clients that you stole from previous MDs; if they went with you, they will be able to put a good word for you.

  • PM in HF - Other
Dec 15, 2021 - 10:02am

This is one of those WSO threads where OP feels at a wall writes something on the internet and people take it way too literally. While some people may be able to politically play nice with everyone many of us have the personality that we choose those we like plus I am sure OP has been "rubbed the wrong way" by others as well. Burning bridges goes both ways if everything was honky dory they would gladly work together. 
I bet if OP wrote I got screwed on my bonuses and vertical progression and many of my clients like me etc…People would respond different. 

Anyways, as others have said once you relax and widen your search will find the right people. I would not write off coworkers who have gone to have resumes like you did too, as it's your work ethic and professional they want to check. I do not think the focus needs to be just on people in power positions.

Dec 15, 2021 - 10:26am
NoEquityResearch, what's your opinion? Comment below:

-1 MS.  While I agree that some us have may personalities like that and we can rub people the wrong way, if you've literally rubbed everyone the wrong way for 10 years and can't get two recommendations, that's something else man.

I've known some pretty shitty and difficult people in this business and they can still get good recommendations. You might be a difficult person to work with but if your results are good, then you have happy investors who would recommend you for example.  But if across the board, no one has anything good to say about you......I mean that's special.

  • VP in IB - Gen
Dec 15, 2021 - 11:11am

Thanks, there is more to the story I didn't get into. Not trying to get doxxed. It's also not the case I can't get any recommendations, but they need to be from immediate and senior managers. 

Once my shop is up and running, it will be clear to people who I consider friends and enemies. 

Go ahead and call me vindictive, but I don't fuck with tiny dicks like NoEquityResearch.

Dec 15, 2021 - 12:05pm
braise, what's your opinion? Comment below:

You seem to be, philosophically, someone who believes that success is inherently a zero-sum game. For a lot of folks in LMM buyout (e.g., me) this does not ring true at all-- which is a function of our investment goal to "grow the pie." I've also been in or seen situations where success really *is* a zero-sum game (e.g., chapter 11). Without knowing more context, it is tough to judge your philosophy on burning bridges, OP. I'll assume that you had to work in dicey situations where there was no "grow the pie" solution.

Taking a purely zero-sum approach, then, just offer a quid-pro-quo to the two folks who like you the most. Based on what you have said, you have worked in zero-sum environments, so these people may respond well to a transactional approach. Be cautious in how you request this, of course.

Best of luck with your new fund, and congratulations on achieving something that few others will.

  • Associate 1 in IB - Cov
Dec 15, 2021 - 12:45pm

As a former LP, new funds would give us 10+ references PER PARTNER without us asking.  That includes references from investors at other funds, portco CEOs, other LPs, whoever.  I'm sure you can find at least two if you really think about it.  

They 100% will call these references btw and ask other LPs about you.  

Dec 17, 2021 - 12:43pm
LoneBluff LP, what's your opinion? Comment below:

Any family/friend connections that are industrial professionals? If you come from a top undergrad and MBA surely you have friends and or family members with some influence. Can I PM you? I want to learn about the process of launching a fund today

Dec 26, 2021 - 4:27pm
alphajon, what's your opinion? Comment below:

Can you approach your next of bosses and offer them co-invest, carry, or some side letter with some type of profits interest in exchange for a recommendation? Not sure if they're still investing and in the same industry as you which may pr Clyde then from investing in other funds. 

  • Principal in PE - LBOs
Jan 7, 2022 - 11:43am

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  • Trader in S&T - Comm
Jan 7, 2022 - 11:48am

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