PE to Late Stage VC
I work at a MF/UMM buyout shop that primarily makes majority investments, though we occasionally do minority deals in bootstrapped, founder-owned companies. I’ve realized I don’t particularly enjoy portfolio work, deal structuring, or the overly exhaustive diligence process.
I’ve worked on both large and small deals, and in my experience, the amount of diligence typically scales with deal size. The same is usually true for deal structure complexity. I also know that I’m less interested in investing in “boring” software companies based in the middle of nowhere. I’m more drawn to later-stage and higher-growth companies.
That said, I’m curious whether late-stage VC comes with the same pain points as PE. I know no job is perfect, but what are the main challenges in late-stage VC? Would public markets or a crossover fund be a better fit for my interests?
Biggest challenges you'd have in late-stage VC -- assuming you mean funds leading a hypey Series E and not growth equity (which is different than what you're describing) -- is mostly that their performance is dogshit. Look at any company getting acquired or going public right now and chances are it was flat / below where they last raised money in 2021 and 2022. There's a bit of contraction going on in the industry now and not a ton of seats available.
The challenge as far as doing the job goes is sourcing, sourcing, sourcing. Since the job is lighter on analysis and portfolio work, pretty much the only metric that matters is whether you can reliably get in front of good companies (or coinvestors) and convince them to work with you. You can definitely get hired at the junior level if you aren't good at it, but you won't move much past (or even to) VP without a track record here.
True growth equity -- talking TA, JMI, Spectrum, etc. -- has performed better and will map on a bit better to your past experience, although my second paragraph still largely holds. Keep in mind those businesses probably aren't any sexier than what you've been doing, they just happen to be growing 40%+. The larger you go the more buyout-y it will feel so I'm not sure you escape much process junk either.
Been thinking through a lot of the same issues here. Seems like I’m most interested in the companies that the hype VC / growth guys are in, but doesn’t seem like a sustainable career.
Is it worth going to tech buyout first to build the financial and DD skillset even though companies are boring af and will likely be pushed out? Can you reliably get looks at the ICONIQ, BOND, IVP of the world post tech PE.
Other problem I see going the tech buyout direction is getting pushed out after 2 years and ensuring up as a mid level fp&a guy at some boring portco after the tech PE stint.
Seems like I won’t like the tech PE kinds of businesses but is it worth sucking it up for more theoretical optionality of going “downstream” when those jobs are scarce and generally promote from within anyway.
Yes, you should very comfortably be getting looks at firms in the category of growth VC firms you listed. Plus crossovers and multi-stage growth teams. Source: I worked in tech MF PE.
I'm not too focused on performance. Things go up and down, and you can be successful and make good money in any high-finance career. I'm more concerned with doing something I'm genuinely interested in, because I believe that alone can help you outperform others and ultimately make it to partner.
That said, I'm less interested in the typical growth or growth buyout shops that invest in boring, bootstrapped businesses like TA, Summit, or GA. I'm more drawn to firms that invest in “sexier” companies in Series C+ like TCV, Greenoaks, Insight, IVP, Meritech, Bond, etc. That makes me think I’d enjoy working at a crossover fund, hedge fund, or in late-stage VC.
I also find sourcing exciting. Speaking with founders, learning from experts, generating alpha, and identifying opportunities early seems like the most interesting part of the job. I initially decided not to go down that path because I was worried about missing out on the technical training you get in PE, but I feel like I’ve now built that foundation.
Are there any other pain points in the job outside of sourcing?
I wouldn't hand-wave the performance concerns. Having to find a new job because your firm had to significantly shrink fund size, or not being able to get hired anywhere because all your deals sucked is a very real (and scary) prospect. With great hype comes great variance of outcomes.
In general -- and this ties into pain points and performance -- it's a very hard industry to generate alpha, and I don't (as a software growth/buyouts guy) find the approach to be very intellectually interesting. These firms all pursue the same themes everybody else is looking at, and then pay nosebleed prices to pursue the same strategy from target to target (i.e. invest like crazy in organic growth). Because the strategies are so commoditized, the power dynamic is extremely company-friendly and it can get pretty annoying to simp all day every day for deals.
Think these are interesting points - why do you do it then?
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