Worth doing IB/PE if want to start business?
Say, for example, my goal is to start an industrial services or manufacturing business. Right out of college, do you guys recommend joining an actual business and getting on-the-ground operational experience or is the professional and financial training you gain in banking/PE more valuable? Also, if this is my goal, is it better to join a small LMM PE firm or do banking to exit to a more "prestigious" and larger platform out of college. I just want to get experience and am not sure if I would be disadvantaged by joining a LMM firm vs larger one.
Based on the most helpful WSO content, here's what you need to know:
IB/PE vs. Operational Experience for Starting a Business:
LMM PE vs. Larger Platforms:
Key Considerations:
Ultimately, the path you choose should align with the skills you need most for your entrepreneurial journey. If you’re unsure, starting in IB or PE can provide a strong foundation, but transitioning to operational roles sooner rather than later might be more beneficial for your long-term goals.
Sources: Do banking and PE make you a better business owner?, Is the IB vs. PE Debate Shifting Back Towards IB?, Leave banking to start a PE fund?, Landing a job in PE, VC, IB with no college degree - your thoughts?
Work at a bank or PE that does the deals you would want to start/buy.
I think this is an under-appreciated part of working in LMM - it gives you a chance to see more realistic founders that started companies from the ground up. You’ll see just how feasible it is and understand what allowed them to scale
Some entrepreneurs have said that working in PE makes people overly risk averse, while you need to be risk seeking to be a successful founder in many cases
I bought a small business through a search fund model but also looked at starting one. I had spent several years in LMM PE and consulting prior.
I went the ETA route because starting a business requires reading the industry dynamics correctly and building to product-market fit, which finance doesn't really teach. If you have worked at an operating company, you're a lot more likely to understand where to find the pain points and gaps in the industry that will make you successful.
That said, the risk of starting in operations Day 1 is your role may keep you narrowly focused, or you may not move up the org fast enough to be credible as an entrepreneur. If you start in a professional services role, your promotions are scheduled / guaranteed as long as you're good, and you can likely move to industry later at a higher level.
For size of company (in finance or industry), you can generally think of it as an axis between self-sufficiency and prestige. If you go join a smaller company / firm, you're a lot more likely to own more processes and be more capable of operating independently. For entrepreneurship, I would generally optimize for that... and keep in mind the rest of the world isn't WSO, my employees / customers don't know the difference between Blackstone and Podunk Capital LLC.
No lol
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