Tech vs HC PE (MM) today
If you could choose between Tech and HC PE (MM) standing today - what would you choose and why?
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Tech, IMO (I know nothing)
Tech is extremely hard to underwrite because AI ship times are short, liquidity was hard to find (until this morning at least), and multiples are sky-high. Private Credit in tech is shifting to PIK-only which signals a lot of the deals done there are behind plan and not printing cash. So probably too much market risk to start playing there at a lower-tier fund that doesn't have a reputation to fall back on. Established tech funds will continue to be a great seat. Historical returns have been good, but I really think it is too frothy at present with the market trading above 45x and could get knocked down significantly if there is a global economic event. Really like vertical software of all varieties and think it is massively underpriced.
Healthcare is interesting because there is tech, fintech, services, etc. - all bundled in a perverse set of rules. It is a disgusting industry outside of a few bright spots, and we should rebuild the whole system from a blank sheet - two decades of administrative and regulatory cancer has spread and now is terminal. Market headwinds will be tremendous if RFK fixes food/water - poor metabolic health (read: fat people) is the number one driver of illness and death. However, you can't just burst onto the scene with an AI platform and wipe out an incumbent like in Tech, so that regulatory defensibility is a huge plus in my mind. Historical returns have been trash over the last few years but the flagship names are still trading above 23x.
I think this is a very good time to front-run the Part C expansion that Dr. Oz will bring in. Also good for novel care pathways, AI/streamlining/software, telehealth, per-diem, and D2C. Anything to do with traditional staffing, FDA approval, low-income, long-term care is going to get hit hard. Ambiguous on pure-play services.
Would still stay in tech if I had to choose.
Well thought out post. I would agree as an PE outsider (who works in healthcare), go tech. I'm starting to regret specializing in healthcare for so long, too many bad apples within the space that directly impact patient care.
Thanks. I think there are many spots in healthcare that are driving human progress. Have you thought about applying your expertise to a startup?
Tech just seems super crowded these days
Which industry has the most tailwinds for the foreseeable future? Which sector in general would you specialize now? Not limited to tech, HC, but financials, C&R, industrials, etc.
Both Tech and HC have advantages and drawbacks, though I'd give Tech PE a slight edge if you're completely unsure on which one you want and just want to preserve optionality. If you were asking about starting in Tech IB vs. HC IB, I'd give the edge to Tech IB any day, but the equation looks slightly different for PE.
Going into generalist M&A, what sector do you recommend spending more time in, ie which sector is most attractive for PE shops if that makes sense
Tech IB for sure - software deal experience specifically would be ideal.
Even if you end up going into a non-tech PE firm, your understanding of tech would be extremely valuable as tech is increasingly impacting all industries.
Many non-tech PE firms started doing tech investments in recent years as well, and that will likely continue to be a trend.
OP here. Any additional views on relative attractiveness of the competitive environment/ability to source deals/return expectations? I get the points around a skillset from Tech being more valuable and create a wider variety of opportunities, but if you were to ignore this point.
Tech for lyfe! Hard to bet against tech these days, however very easy to overpay. Only ethical thing you have to worry about is moving tech jobs overseas (accelerating the inevitable), cant say the same for healthcare these days given all the ethical challenges the US system faces
Tech for sure
healthcare investing is going to become even more difficult and complicated with increased scrutiny / regulatory pressure (see how many of the large caps are leaving the healthcare services space and look at all the talk surrounding the UHC news). HCIT and likely Pharma will be fine (but you can use your tech experience to go into HCIT so there’s that flexibility)
As I think back, I wish I had specialized in tech versus industrials / services - feel like there are a lot more career paths in tech, from joining corporate / startups (rather join a tech company versus some industrials corporation) to doing growth / venture (which industrials and services are not relevant)
And you don’t think competition is an issue. Seems like there are an insane amount of tech focused firms driving up valuations?
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