"We don't hire VPs"
A leading upper mid-market PE firm emailed me this: "It’s rare that we recruit for a VP role. We typically hire at the Associate or Senior Associate role and promote."
This seems fairly typical, although it's rarely expressly said. Why is it so hard to lateral as a VP?
because you are too expensive...for not much more added value
my brother is a senior lawyer...and he hires a lot of junior lawyers for his firm...he says the sweet spot is 3-5 years of experience....trained....but not too expensive
You are quite expensive as a VP and probably don't have the rolodex to pay your own way just yet.
Rolodex for sourcing? It's not that hard to get on the radar of 20 banks or so
I'm not talking about the standard "let me call up an investment bank." Any idiot can do that. I'm talking about having a real network for truly proprietary deal sourcing. That's when you're worth something.
I thought that's what Tinder & Bumble are for
That's not sourcing! Connecting with banks to get highly-brokered and expensive deals is not sourcing. The secretary can do that. Finding proprietary deals off-market ... that's sourcing. Leveraging your own contacts to get industry insight and find a deal that is un-baked, that's sourcing.
Ok. What does a proprietary network look like for a generalist at a mid market PE fund? Knowing operators and entrepreneurs and industry participants?
Serial entreprenuers, board members, other investors, commercial bankers, etc.
Why does knowing serial entrepreneurs and board members help? You mean to bring them to a board yourself?
Commercial bankers makes sense..but again those are easy to make. I doubt they are hiring VPs or not based on how many commercial bankers you know
Example: There was a big healthcare company listed in US. Valuation was not cheap, but CEO thought it was worth more. My MD called on this guy every other month for a year and visited with him every time he was in town. Listened to the CEO bitch about how his stock should be higher. A number of other PE shops had visiting the CEO suggesting he take the company private but he never pulled the trigger.
My MD finally was able to convince him to go private, and that we should be the one to do it. He had our team fully underwrite the deal, do a f-ton of analysis, and show him how much it would be worth as a private company - that could then go public later. Then we flew in our big LP backer to convince the CEO that we could use the LP's money as a co-investor to fully fund the take-private. The CEO gave us the mandate, and we built the syndicate and did the deal. We did 5x in 4 years on that deal, taking the company public later after breaking it up into divisions and taking them public as several different companies. No ibank would show you a deal like that. And if they did, pricing would be awful. That's sourcing.
Example 2: One of our associates saw a growth company as a case study in his part-time MBA class. It was a well-known family-owned/run high-end appliance and furniture company. It was a good brand, but behind the curtain, the family members were not getting along. He pitched the company on the idea of us coming in as growth capital and helping professionalize how the company was run. Bringing in outsiders as C-level executives - as opposed to letting family members be all the C-levels. That got the family members to not have to be involved, and stop gumming up the gears. The company accelerated its growth and we took it public. The associate got a bump to ED and shortly thereafter, MD.
That's sourcing.
Great stuff! I notice that one example was an MD, one was an Associate. Which sort of proves my point, I don't think VPs are hired for proprietary deal sources, whereas you can be a good sourcer at any level. I actually did a ton of sourcing when I was a junior associate.
Goddamn, posts like this are why I fucking love this site.
Thank you for the insights.
That's one hell of a haul for an associate. Does someone that junior who brings in a deal get any special sweetener for it?
Great answer. I wish I were that associate being promoted to MD.
May I ask you which ways you can start building your network for proper sourcing? I just have started as Analyst in FoF and we do plenty of co investments. Placement agents are terrible and we do avoid them.
Thanks for your advice,
Good for the associate, and wasn’t there obviously, but the idea doesn’t sound especially brilliant. Surely was good at other stuff though and sure the company appreciated him thinking about them when in school and seeing new opportunities. Also shows initiative etc
1) Cost. The cost of you flaming out is high in terms of both time and money- you don't really know an employee until they've worked for you for awhile.
2) Culture. A mid or senior level hire is more difficult to mold into a firms culture, since they're bringing a lot from their old firm.
Its much easier and cheaper to hire a few Senior Associates and promote the best one, you know what you're getting.
Can't both these things be mitigated by good hiring? If you hire someone who did well at his previous stop(s) and interviews, case studies, reference checks all come up aces, isn't the risk minimized?
I imagine someone can be great at his/her prior roles, but still not be a cultural fit with your very firm.
I always thought it was related to cost and culture per m8’s post too. The former point due to the person still being too junior to likely have developed their own rolodex without ties back to their prior firm’s (relationships of their own), and therefore is like a very expensive Sr associate. The latter point also considering whether the person is “moldable” and willing/able to learn the new firm’s style and approach.
It sounds to me like you're a little too deterred by this firm saying "we typically don't hire VPs". Because your pushback is all about how atypical you are . . by your description you were a star associate with your own proprietary deal sourcing, which is rare.
So something isn't adding up to me. If you are the rare asset you claim to be, you should not be deterred by a firm telling you that they don't usually hire VPs . . you should be all like "no shit Sherlock, I'm the exception." Instead you're on WSO trying to understand why they don't hire VPs. Doesn't square.
Hiring is REALLY hard. How can you tell really what someone is going to be like, until you've worked with them? This is especially true in finance, where everyone is a pretty good talker. Even the worst backstabbing sociopath can be a good interviewee. And how can you tell if they'll be able to bring in deals, to lead, and to deliver all the way to the hard end result? Show me how to do that, so that I can be the recruiting / hiring king, and I'll thank you for it.
PE has 3 parts - analysis, sourcing, and fundraising.
You need an MD to do sourcing and fundraising, and analysts and associates to do analysis. VPs serve no real additional value over associates, and haven't proven their ability to source or fundraise.
And I say that as someone who can't do sourcing well or analysis well, so I just suck and can't break out of my directorship level.
Not sure I agree. Where I've been, VPs and junior directors are the quarterbacks of deals. They are the ones quarterbacking it end to end, with Associates for support and MDs for oversight/key decision making/big picture stuff. So you could argue that VPs, veing most responsible for deal execution, are the most bang for your buck.
But isn't 'quarterbacking' itself a term invented to describe jobs that have nebulous value? Partners can point directly to deals they've sourced and money they've raised. Junior folks can point directly to their low pay and long hours of analysis. What can a VP point to? 'Quarterbacking' . . sure but it's a lot less of a leg to stand on than the previous two examples.
This is why mid-level folks are the most frequently fired and most rarely hired people in almost every profession. They're stuck in no man's land where they are too expensive for junior work but not senior enough to point to a book of business. True in banking, PE, and probably most things. Need to cross the abyss and best strategy is to demonstrate that you're likely to be successful at the senior level. Never too early to start winning clients and deals on your own.
I agree with you that VPs have a lot of value quarterbacking deals. But it's a risk-reward issue for some firms when hiring VPs. If they hire associates and train them up, they know what kind of person they are getting. If they hire an MD, they've usually worked with them on deals and are impressed with them. That MD is going to be bringing in LP money, dealflow, and hopefully leadership. The VP lateral is rare. That VP may not have performed at another shop. And even if the VP is solid, how can you know? You never know how a person will perform until you've worked with them. An associate is a much lower risk-to-potential-return bet. Plus VP and director are notoriously challenging positions, in that the VP must start also sourcing deals. Many VPs don't make the transition from analytical to hunter.
Btw guys, we're talking about lateraling as a VP. So assuming that VP has the skills that transfers to the new job, and yet most places won't even look at them. How well you did your job does not appear to be part of the equation.
your best way of lateraling is to de-risk the hire, and to breed familiarity. To do so, show up with live deals in hand, that the firm can act on. Of course, if it's in the same space as your firm, it begs the question why you're not doing these at your present shop. But if you're moving from a tech PE shop to a healthcare PE shop, for example, and you started to call on them with proprietary healthcare deals, then maybe they will get more comfortable with the idea of hiring you.
Are you sure you're in PE? this sounds like what a HF guy would do with investment ideas. Have interviewed at many PE shops and having "live deals in hand" is total nonsense. Not to mention, I didn't even get the interview here, they flat out refuse to interview VPs, so having live deals is not even on their radar.
So I see a fundamental disconnect between what everyone is saying, and what I have seen from VPs in my career. You guys act like sourcing is this golden nugget that precious few have and if you have it at one firm, you can't lateral it to another. I've seen sourcing up close, it's not that hard or proprietary. Just by sticking around the industry you'll develop relationships.
VPs, to me, are the quarterbacks of deals. They are responsible for end to end deal execution. Associates do some of the heavy lifting, and MDs are responsible for oversight/key decision-making/big picture strategy, but the success and progress of the deal falls on the VP. He spearheads the process, makes sure all the Associate shit is right, thinks of everything, manages the diligence, negotiates the purchase agreement, pretty much everything. Buck stops with him. No one is more responsible for deal execution than a VP.
Now imagine you've been doing that with great success at one firm. You want to take your talents to South Beach. But that firm says "we don't hire VPs." How does that make a lick of sense?
I don’t work in PE but these guys have answered the question - even if it’s BS (and I have no perspective one way or the other), you’re dealing with a perception from this company that you’re in no-man’s land.. more expensive than hiring associates to build the “farm team” and not yet a rainmaker.
I’ve been caught in a similar situation in my line of work and I hope someone gives you a shot.
Put yourself in the shoes of the senior partner. You've got several 26 year old associates who got straight A's in college, did two years of crazy hours in IB and have now done 2 more years in PE. They've learned more in 4 years than many people learn in a decade. You sure none of these guys can be a 'quarterback'? You sure you'd instead hire an outside VP who (i) costs more money, (ii) hasn't been observed by you like these associates have, (iii) hasn't been brought up in the culture of your small tight-knit firm and (iv) is mysteriously leaving his current firm when that firm would have every incentive to make him stay given his excellent deal sourcing?
I would have zero interest in even wasting 30 minutes talking to this candidate until he presents a very straightforward reason why it does make sense. For example, he's getting married and has to move cities. Or he has a substantial pool of attractive deal opportunities that his current firm simply cannot or will not pursue for a clear reason.
you got this man
Not that I disagree with what has been said, but PE firms just very very rarely recruit VPs to begin with. Why, because they pretty much always have a bigger class of associates / senior associates than they can promote (remember, headcount distribution at pretty much any PE firm is an hourglass) so you see significant attrition at that level. Given that most senior associates want to carry on, it create a situation where you pretty much always have more internal candidates that you'll have openings so there's rarely any need for external hire.
How can you say that when ~200 MBAs get hired as VPs every year? Are you referencing small (
They all have prior PE experience...a lot of them at the same fund they're going back to...
I'd bet you next years bonus that less than 1% are breaking in from other fields post-MBA. (1% just to hedge).
You got this man. Treat recruiting as sourcing proprietary deals, and I am sure you will find something good. There is no value add in listening to other people telling you why it doesn't happen
Aren’t you a 2nd year associate at LMM firm?
Bit early to think about VP roles eh...
LOL good catch
How do you figure?
Bolded in the quote above is my edit.
It might be rare, but that doesn't mean the door is shut. Be the rare person to make it; be different, work hard, work different. I've done it twice in my career and I'm trying again for the third time. It's not easy. It's time consuming, and boy is there a lot of rejection, uncertainty and tons and tons of naysayers. It's never easy. But the best things in life don't come easy so...
Good Luck, OP
Wait, you’ve moved firms twice at the VP level (or a level people don’t usually hire at) and looking to do it a third time? Or do you mean beating the odds / not being a traditional hire in general?
The latter
There's also the carry issue. It's a lot more palatable to give that up to your top associates who you've indoctrinated and have babysat for two / three years than to someone you've met for a couple hours.
Also, the idea that mid-level PE quarterbacking provides zero value is laughable. Getting awesome debt terms can make a huge difference and a big diligence miss can cause a ton of damage down the road.
Not zero value but consider the incremental value of a VP's quarterbacking skills vs. a seasoned PE associate. Maybe some value there, in some cases. Now reduce that by the fact that VP is more expensive. Then reduce it further by the fact that associate is someone you've managed for two years in-house whereas outside VP is someone you've met for a couple hours. I'd also cut it down further by a risk factor of why has the VP not made things work at his current firm (obviously this is case by case).
After all that adjusting, I don't see much left for the quarterbacking argument.
I think we’re in agreement here if I understand you correctly. Totally agree cost benefit is much better on promoting versus outside hiring.
My comment on quarterbacking was more general in nature. I think the mid level can create quite a bit of value on leverage terms, purchase agreements and especially on diligence. Toss in a transition services agreement, and you’re way out of an associates depth. If you miss something material and toss a multiple on it, the dollar value gets high quickly.
But I'm comparing a seasoned VP vs a seasoned associate, not a new to the industry VP. There is a significant gulf in the ability to get deals done between as associate and a VP. If there wasn't, the VP position wouldn't exist.
If they won't give you VP, aim for MD instead.
Generally for a firm to hire at the VP+ level, they need to see a path to revenue. If you can give them the confidence that you'll be generating revenue for the firm within a few years, you may have a shot at VP+.
Generating revenue in a PE context is usually about getting on the right short lists (bankers, CEOs, entrepreneurs, lawyers, accountants) so when deals come through, you get the call, and when you need to close the deal, the right people are there to help you do so.
Not true. I was recently approached to a competing firm for an Investment Director role (within their internal hierarchy - this is a VP level). My current firm focused on merchant banking (a mixed with direct investing and investment banking).
Sourcing
Few people who did IB post b-school made it to Private Equity. Those few who did went to tiny shops you’ve never heard of, or went back to their country of origin (think developing markets).
Having said that, VP’s still land well. Especially, if you’ve covered tech. Most do Corp Dev and make the transition to some business line. And ive known some to make the leap to VC thereafter.
Haven't read every single comment, but I think there's a simpler explanation for this one firm's commentary on hiring VPs: They don't need to. If they're investing in and cultivating their associates, they'll be able to pick from a pool of them who are all known-entities and low risk.
It isn't that they don't need VPs or are struggling with the value of a VP in general, it's just (maybe) that they figured out a long time ago that that's a risky level at which to lateral people in, so they put themselves in a position to not need to.
did somebody say sourcing?
I'd assume also that it's similar as to why most investment banks hardly, if ever, hire for FT...because they already have a class that fills the need
This is fully false. Every year about ~150-200 MBAs get hired as VPs at funds across the country from H/S/W . They make 350k and in many cases much higher and get carry.
Those are primarily at bigger firms where there are more layers than middle market firms, so the VP title is really like a senior associate title at many other firms without as many layers, and you're very much in a period where you have to prove yourself still.
This post is referring to facing resistance when lateralling as a mid-level professional from other firms. It's not about whether firms hire folks into post-MBA positions or not. It doesn't matter whether the mid-level position is called "VP" or "Principal" or whatever, that's not the point of the post.
Lets dissect this and the above post.
Point 1: The OP said funds "don't hire VPs" and instead hire A/SA. So it becomes important we clearly define VP. I see VP as a (i) role that pays mid to low six figures depending on fund size, (ii) has (substantial) carry in the vicinity of low seven figures and (iii) the role involves QB'ing deals and managing 1-2 people (post-banking associates) and reporting to someone who is just 1 level removed from partner (i.e. principal). E.g. at BX this is called senior associate but the next promotion is to Principal. E.g. 2 at KKR this is called principal.
Point 2: Around those being bigger funds. I know a current MBA who has interviewed at funds ranging from latest fundraise of 1bn to 25bn where VP is largely a deal execution role that has the above characteristics. If you're referencing even smaller funds, then perhaps your post is accurate.
If the above is the case, then it is necessarily true that funds recruit VPs from MBAs and the OP is necessarily false when he says "funds don't hire VPs." Yes, SOME don't (e.g. H&F) but many, many do (e.g. CD&R, BX, Carlyle, AmSec, Advent) etc. etc.
I also challenge the notion that funds don't hire laterally. Anecdotally headhunters have told me experienced VPs have strong marketability.
Maybe in the LMM VPs are doing deal gen but that's a principal/partner level responsibility 9/10 times. VPs are deal execution guys managing 3rd parties and associates.
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