Ask Me Anything: Post-MBA at Early PE Firm

GoIllini:

Thanks for doing this man! What advice would you give to someone who is currently a FLDP and thinking about trying to make the switch. Top MBA? Then what if there isn't a direct path at graduation.

Also, what does the comp look like at your firm? Any interest in getting an MBA PT or in the future?

Thanks!

Good question. Making the switch can be difficult, but it's totally dependent on the skillset you've built. For example, we'd consider Associate-level candidates that spent two years in an FLDP program at a technology company if they had some finance experience. But my guess is most PE firms want bankers, so an MBA is probably your best route. Even still, getting an MBA is no sure-fire guarantee to get in, as you alluded to. A lot of it is network, network, network. It's a people business, first and foremost, so if you get people to like you and those that'll go to bat for you, it'll go a long way.

Comp is pretty solid for my size fund (sub-$300M). It's not anywhere near what I could make at a pure PE fund, but I also have more carry than most of my counterparts at those places. Once I got to a certain cash compensation point, it became less about what I make and more about what I'm doing. I'm in the $200K-$250K range in cash, and layer carry on top.

GoIllini:

Thanks for doing this man! What advice would you give to someone who is currently a FLDP and thinking about trying to make the switch. Top MBA? Then what if there isn't a direct path at graduation.

Also, what does the comp look like at your firm? Any interest in getting an MBA PT or in the future?

Thanks!

Hey,

Thanks for doing this. I am a French undergrad student and I will take a gap year from June 2014 to September 2015.

I am looking for an internship in VC/Growth Equity. 2 to 6 months. Do you know any funds that offers any ? I know it is pretty rare. So far I have only found One VC that offers internships. Any advice on where I could get more info ? Do you think cold-calling can work ?

LBJ's hair:

Thanks for doing this? How is the investing process different in tech growth equity vs. tech PE?

I'm actually guessing it's fairly similar. The one caveat is that there's a lot more financial engineering going on in PE, and likely a lot more focus on how to improve cost efficiencies, whereas growth equity is about growing the business. As a whole, less diligence goes into a $20M investment than a $250M buyout, obviously, and there's far less history to go off of when you're looking at a $10M revenue business that just grew 150% vs. a $75M business that's plodding along at 20% growth.

That said, the process is probably similar: identify company, meet with management, spend time upfront doing preliminary diligence, come to agreement on IOI/term sheet, commence confirmatory diligence (typically this time period is shorter in growth equity than PE), hopefully no red flags, begin legal, and close.

Does that answer your question or not really?

NishNash14:

Once you do get your first gig, how exactly do you network or make the next step to a different firm?

Thanks!

Well, I went the "traditional" path. I actually interviewed at a number of other firms, all through headhunters. This is pretty common for a banking analyst, as a lot of PE and growth equity firms (and larger VCs) have traditional recruiting cycles focused around hiring banking analysts. The job I actually landed was through a connection of my MD - he introduced me to two partners at my current firm, they were interviewing for an Associate, and I went through the process and lucked out.

If you're looking to network, I'd leverage the heck out of your undergrad, workplace, and then try to use co-workers to make introductions. A warm introduction is typically better than an intro through a headhunter. But the fact is, once you get to the interview it doesn't matter how you got it. So do what you have to to get the interview and then don't blow it.

BlueShirt:

1) What enabled you to get promoted to a post MBA position? Is that a fairly common thing at ~1B total AUM PE funds?
2) Do you think you will regret not getting your MBA? (Do you think the lack of pedigree will put you at a disadvantage in the long run? CompBanker said in his interview that he wanted a MBA for job security in case his PE fund goes belly up)
3) What are hours like for your position, and your bosses?
4) Looking back, do you wish that you had done your analyst stint at a BB or did you like the MM experience? ( I'm Junior at semi-target going through recruiting right now)

1. I think it was a third luck, a third fit, and a third performance. I got lucky because at a fund of my size, it's pretty rare that there's a career-track position available right at the time my pre-MBA role was coming to an end. Most funds my size have a few partners and a 2-3 mid-level, VP/Principal level guys. Culturally, I fit in really well with the career-tracking guys; have strong relationships with the partners and other mid-level team members. And finally, I think my performance helped me out. I did my job as a pre-MBA associate well from the get go: I sourced a handful of deals, was extremely strong from a diligence perspective, and had a nose for good businesses. Over the past 18 months, I took on a hybrid role of pre- and post-MBA - I still did my job as pre-MBA but took on a lot of responsibilities typically reserved for post-MBA. I think that helped me out.

2. I don't think so. Me and CompBanker are in separate roles - he's definitely more PE, where pedigree is more important, and I'm more VC/growth equity where once you get the post-MBA role, it doesn't matter so much. It's definitely more about culture and performance than it is about business school. That said, if I ever wanted to move into a buyout role, I'd wish I had the MBA - but I don't foresee that happening.

3. I have a good about of flexibility about being in the office. I'd say on days I'm in the office, I get in around 8-8:30 and am out by 6-6:30. Fridays I'm out by 5. I haven't been in the office on a weekend but once or twice in the two years. That said, it's a 24x7 gig. I'm responsive to emails until 11-12 at night and all weekend, and when things are busy (deal work), I'll fire up the laptop from home at night and on the weekend. I typically spend a couple hours on the weekend from home working. I've also started traveling more recently, which is definitely a bigger time commitment. I can be away from home for a couple days at a time, and on day trips it's usually a 6-7am flight and I get home at 9 or 10.

4. Not at all, I'm thrilled with what I did. MM IB in tech set me up perfectly for my current firm, which typically hires from MM tech banks. I also feel like I got a better experience because it was usually just me and my MD or me, VP, and MD, so I was expected to actually think (albeit only a limited basis, but still a lot more than some of the analysts in BB!).

cc66:

When you decide you like a company does the decision to invest in it or not become yours, or do you present a case to the VPs and partners and have them decide? Does this vary between firms?

I'm definitely not at a point to sponsor an investment. The way it works now, all investments have to be sponsored by a partner. So, when I or another VP meets or speaks with a company we really like, we might write up a summary for Monday's meeting or go to a partner that we think makes the most sense and discuss with them. From there, it's a very iterative and collaborative process - often times it's just me and a partner, so we'll make the decision together. Sometimes there's a junior associate on the team as well (if he sourced the opportunity) and we'll work together as a team. But the partners at my firm are very collaborative in nature and it's usually a team decision to either push forward or call off the dogs.

EDIT: Also, I think this varies quite a bit by firm. I know there are some firms out there where partners don't give a shit what any of the non-partners think, and then there are some firms out there that let VPs/Principals essentially sponsor the opportunity.

zeroblued:

are you in San Fran now? or which city doing VC?

I am based in Boston but unfortunately spend far too much time in the Valley. Probably out there once or twice a month, which sucks for flying.

CompBanker:

Thanks for giving back bud. Congratulations on the position. Remember when we didn't know anything about anything? Amazing what can change in 5-6 years.

Ha, thanks man, appreciate it. I could probably put together a pretty good argument that I still don't know anything about anything, but that would seriously diminish the validity of this thread.

Hope things are going well with you. I see you decided to head back to school... not bad. There are many, many days where I'm jealous of your position (especially when I find myself boarding a red eye for the third time in a month).

LDNBNKR:

Can you detail your reasons to leave? How transferable will the skillset be to l/s and how difficult was it to get in contact with the right funds?

I don't really want to leave my current gig, I actually love 98% of everything I do. That said, there are certain things that suck; specifically, as with any transaction-based business, there are lulls where we're not doing deals. That's not fun. The role I've mentioned in a few other threads (L/S) was very opportunistic - it's completely focused on the sector I focus on now and that's a huge plus, and it also focuses on businesses that I know a lot about. The HF also has a venture capital vehicle on the side which I would be one of three team members on which is really attractive to me - best of both worlds.

End of the day, I think the most transferable skill I've obtained is industry knowledge - I totally get the business. Modeling is easy so that's a non-issue.

c4td0g:

Does your firm require 2 years of experience in IB?

My background is in tech as an entrepreneur and I had back to back IB at the same firm in the tech/special situations group.

If you're comfortable providing more information I would appreciate a PM.

We actually have junior associates straight out of undergrad, so no.

So by back-to-back IB, I assume you mean "internships?"

Shoot me a PM. You have an interesting background and we're always considering candidates, especially at the junior levels. Tell me a little bit about yourself, what you want to do, and where you're located/want to me.

packmate:

Curious, what is your opinion on venture debt as a form of financing?

Meh. I think it's nice as a cushion or for a bridge, but I'm skeptical of businesses taking on interest-bearing financing when they're already losing money. It's also hardly a source of growth capital; usually the lines a business can obtain can support a few months of aggressive spend, but it doesn't support a full-out growth plan. A good number of our companies take on venture debt 12-18 months after our investment because 1. they're approaching breakeven, 2. cushion is always nice to have, and 3. it's cheap.

However, it can be nice if a company expects to see a significant amount of value creation in the next six months but needs some form of bridge before financing. This helps reduce dilution and it can typically be taken out in the financing (whether it be convertible or just redeemed).

bison@11:

Thank you for doing this. Since you made it to PE from a non-traditional background, do you have any advice for a strategy consultant with a top Big 4 consulting firm. I completed 2 years with the strategy practice and was promoted early to Associate. After promotion, I joined the M&A Transaction Services group and have experience with target screening and due diligence for a variety of transactions.

Hmm... I mean, I think you're basically in a banking role now (right?), you should try to speak with as many headhunters as possible. We'd seriously consider someone with your background in a pre-MBA role if you worked in the same industry as we're focused in, assuming all the other important things checked out. I think the best way to lateral into a PE position would be to pound the pavement and network (and also, make sure you understand private equity or growth equity or venture capital or whatever it is the firm does you're speaking with) with both industry folks and headhunters.

As an aside, one thing I'll say that amazes me about a lot of the candidates we interview is they have no clue about the difference between private equity, venture capital, and growth equity, and they generally have no idea what we actually do. I realize it's not something you might learn a ton about in school, but it's very well-documented (especially on these forums) and it's my #1 turn-off in interviews.

Onyxcap:

Thanks jimbrowngoU doing this.

I am a non-MBA and have been out of college for 5 years. I recently accepted an offfer for corp development (m&a)/corp strategy role. My long-term goal is to get into PE. I am currently studying for CFA. What should I do to network in PE?

You've got it.

Well... what did you do for those five years? That'll be relevant. The first thing I'll say is, get a good experience doing what you're doing. If what you did for those first five years isn't totally relevant to PE, you're going to need to spend some time at this role building out your transaction skills.

I'll tell you, at least in my industry, I constantly see M&A/corp dev/corp strategy guys lateraling to PE/VC roles. You're going to build a very transferable skill set and knowledge base. But you need to actually build those skills and that knowledge before you can be marketable. In the meantime, I'd network with some of the PE guys that you buy businesses from (or could buy businesses from). That's how it happens - if you start digging in on a PE-owned target, you'll probably get exposed to the mid-level guy at the PE firm - work that relationship as much as you can. Professional relationships go a long way when it comes time to move elsewhere.

Also, the CFA is generally irrelevant, in my opinion. I don't know any PE guys with it. I'd almost say forget that and spend more time getting smart on your industry or networking (or just enjoying life outside the office, as the CFA doesn't really matter in this industry).