For IB analysts -- why the attraction to PE instead of VC?
Just as the title asks, why do most analysts in IB want to go into PE instead of VC? Is it because there are more opportunities for analysts in PE, in that VC firms want people with more operations experience, or perhaps more tech experience?
VC investing seems like it could be really interesting (investing in these young companies with huge growth potential), but it just seems like most of the people on this forum have blinders on for PE, and I'm just wondering why.
PE is more data driven- anyone with IB experience can do fine in PE because a lot of it is just financial engineering on models to see if something is a good investment. VC you actually need to think, and its possible for really smart/hard working people to be really bad at VC. Also, PE definitely has bigger headcount needs, so there are just more seats open for PE compared to VC. Lastly, comp in PE is generally higher than in PE, especially at the junior level.
Makes sense. Comp wise, do you think VC comp is lower for juniors, but potential payout down the line is greater? And if so, is VC comp riskier -- meaning there's also a great chance of making NOT that much as a mid or senior person?
Comparing senior comp at VC and PE is silly- in either industry, you can make insane money if you are good at it. No good PE or VC partner is struggling with money.
Both VC and PE comp are primarily based in carry, which ultimately comes down to fund performance. PE comp is probably more reliable because it's a lot easier to buy a billion $ company, grow it 10% a year, and sell it for double and return a billion for your fund. In VC, you are making minority investments so to return a billion dollars, if you have 20% of the startup you need a $5b dollar exit. This is a vast oversimplification, but VC is generally more home run or strike out whereas PE its a lot easier to make a bunch of investments that perform reasonably well.
Got it, so it sounds like PE is arguably the "safer" route... though as you said, can still be extremely lucrative.
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