Is it true that Private Equity requires more quantitative and technical skills, while Venture Capital is more qualitative?
From what i'm reading online, i get the idea that the job in PE involves more technical knowledge, working a lot with models, and having in general more quantitative skills to be applied. On the countrary, i seem to understand that while a certain degree of quantitative skills are still required in VC, there is more emphasis on the qualitative side of the job, on the due diligence, and on networking in general.
Can you tell me if this is true or not? Any insight will be greatly appreciated.
PE and VC are, at heart, the same thing. The difference is that in PE you buy in to established companies, whereas in VC you're buying in to startups/less established companies. My experience in VC was that there was some quantitative aspect to everything, but that there often wasn't enough info to dig in to the same level quantitatively as a PE firm would. As a result, a lot of the analysis for an investment has to be done qualitatively (Where does it fit in the market? Do we think this is a good idea?).
I think that in terms of expectations for skillsets, VC/PE probably have the same/very similar requirements for qualitative/quantitative ability, but you will probably do less quantitative work in a VC since there is just less data to work with.
Thank you for your answer, i was already thinking that when working with startups you have materially less data in order to do proper analysis, now i have a confirmation of that.
If you don't mind, can you share a bit more about the actual analysis (both quantitative and qualitative) that a candidate is expected to be good at in VC? I mean in real working terms.
Fact is, i always hear "quantitative analysis", but i still didn't have a proper internship in finance, and this kind of analysis sounds a bit vague from the outside and being a student.
From my experience in consumer/retail VC:
Quantitative analysis:
Qualitative analysis:
You need to be able to form strong, informed, correct opinions on all of those things, about any company in your sector, in a short period of time, and communicate those opinions effectively.
I would say on top what has been already said:
So for example, repeat entrepreneurs can garner higher valuations for the same exact product /solution than entrepreneurs without similar backgrounds.
Feel free to PM me.
Short answer is you better buy WSO Private Equity Package and go through the lbo model if you want to get a job in PE. As for VC, most of the time, if you have operating experience in relevant sector (i.e. run your own e-commerce company), you should be fine. This is for entry level positions (analyst/ associate).
How applicable is skillset in PE to VC? (Originally Posted: 07/13/2011)
Have SA offer with Deutsche Bank for next year. Ideally want to work on their LevFin desk, do a few years there and then move into PE. Do another few years in PE, hopefully at a megafund, and then move into VC. Just wondering how applicable is the skillset in PE (working with late-stage companies) to VC (early-stage companies)?
Pretty stupid question, and you just answered it. How would working with late stage companies be applicable to early stage? I would do some homework on the two completely different structures.
Pretty stupid answer. You suggest I do some research on the two fields, what do you think the point of this thread is? I have a decent undertsanding of the work in PE like how they select & source investments, modelling & valuation etc, but I'm interested in how the work in PE compares to the day to day activities of someone in VC, especially the technical aspects of the job, and if there are any similarities.
I am currently in neither field (though bound for MM PE soon). I have heard, however, that the overlap is fairly limited. Possibly the massive VC funds may have analyst/associate roles that parallel PE, but several headhunters told me that due to several factors, VE roles tend to be very different from PE roles.
Specifically, many VC firms have a senior-model sourcing component for relatively low-level roles (attending conferences, building up a strong personal network/brand in the field most likely internet or biotech, and proactively seeking deals).
VC firms also seem to value modeling less as opposed to operating/entrepreneurial experience. Part of this is that early-stage companies don't need highly granular models (garbage in, garbage out). Instead, they require broader awareness of industry trends combined with an ability to contribute materially on the operating side (VC portfolio companies will naturally have less mature management structures).
Finally, there are many VC firms that operate with only 1-2 partners + 1-2 associates, leading to broad range of responsibilities early on but also a very inconsistent career path (potential for quick advancement if fund grows, or staying in the sub-partner stage for a loooong time)
I didn't look at a ton of VC roles, so there may be other differences I am missing.
These three points were hammered home to me by headhunters. One other that I noticed was that VE has a surprising number of partners with legal backgrounds. Not sure why this is, but maybe the legal aspects of early stage transactions are more complicated?
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