Moving Upstream in PE

NotTheFeds's picture
Rank: Chimp | 13

Moving upstream in PE is notoriously challenging and I would greatly appreciate some advice from the community.

I am currently working in a very small PE boutique with only three investment professionals. I have an MBA from a non-target state school MBA program. No investment banking background. All-in-all this is a good job: decent pay and generous carry. However, we are only doing about 1-2 deals per year, which is all we can manage with our limited bandwidth.

With this background, I definitely see a need for resume strengthening. One idea I've had is to do CPA => Big 4 => MM PE back office, with front office being the final goal

Does that make sense? Too convoluted? What has worked for other Monkeys? Thanks in advance.

Comments (13)

Most Helpful
Jul 6, 2019

If you are already in PE in some capacity, going out of your way to get your CPA and work in Big 4 accounting would be a huge step in the wrong direction. From what I've seen, the only people in finance who have a CPA are those who started in Big 4 accounting before transitioning into banking. If your final goal is PE, it makes no sense to leave simply to try and come back.

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Jul 6, 2019

Dude you'll have way more luck eating up more responsibility where you are now and using that to push in. Experience in PE is far more valuable...

Also if you have generous carry why leave? You could end up making far more? Especially if the fund is doing well and growing?

Jul 7, 2019

That's a valid point. Our shop is relatively new so I won't actually receive carry for a few years until we begin to make exits. That's a bit beside the point though. My main concern is that I will never be able to move upstream down the road, and I'm interested to work on larger deals.

Jul 8, 2019
  1. That's how carry works across all PE funds, you don't get anything until exits (that can be subject to clawbacks). It doesn't matter if you're at a small fund or a MF, except small funds are more likely to give carry as part of the compensation package earlier on in your career (there's obviously the trade off of likely less annual cash comp).
  2. What's your fascination with doing bigger deals (however you define that size wise)? Is it more than just the cachet of working on "sexy deals"? Do you think you can do better than your colleagues/peers? Unless you think you're better than the average investor at a MF/UMM, why would you want to compete with that group of peers long-term for career advancement? More importantly, there are plenty of very very sophisticated MM/LMM investors most people won't know or won't know very well (even within the PE industry), but generate absurd returns (I'm talking >4.0x CoC consistently since inception across multiple funds) and discretely making themselves rich as hell.
  3. Lastly, as others have said, what you're proposing makes absolutely no sense. Aside from the fact you're LESS likely to get back into PE after leaving to pursue that route, think about how many years of relevant experience/career advancement and amount of compensation (annual cash comp and carry including vesting) you're giving up by going through some convoluted route via CPA/accounting. The potentially more viable option would be try to get into a top strategy consulting firm (i.e., MBB), as you'll gain more relevant operational experience and MBB (especially Bain and McKinsey) are also sought after by PE firms, particularly those that are consulting friendly. Even then, that's a questionable route that may not give you the better financial upside you're hoping. The reality is if you want to make a shit load of money in PE these days (i.e., make Partner), it's because you created a shit load of value for your firm based on your own hustle, not because you just happen to have worked at X, Y, Z brand name companies. It matters early on in your career because it's signaling (and to some extent building base foundational skills and thinking), but as you're moving up, your PE employer will largely only care about how much money you're making for the firm.
    • 4
Jul 7, 2019

No, it doesn't make sense.

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Jul 7, 2019

I know of people who moved from UMM pre-MBA to MF post-MBA.

Jul 8, 2019

If you don't like the amount of deals you're doing - go source some deals and captain those.
If the carry is generous, you can really max out your upside.

Jul 8, 2019

The path you're suggesting doesn't make sense. If you're already in an investment role, and you already have an MBA from a non-target school, I think you've done exceedingly well for yourself. If your fund does good deals and has good returns, you will naturally raise more money for your next fund and each subsequent fund thereafter. That's your most natural path to doing bigger deals. Crush it on these smaller deals, show LPs that you can generate returns, then use your success to raise capital for funds with slightly larger EBITDA targets. It's called 'strategy creep', and people do it all the time. Sometimes they shift their target EBITDA or revenue targets, sometimes they shift to adjacent sectors (allegedly adjacent--sometimes just totally different sectors).

As long as you can generate returns, you will be able to raise money. Every shift away from the core strategy which generated those returns will be tough, but as long as it's relatively close and your LPs trust you, you can probably move the goalposts incrementally in each successive fund raise. In this way, you retain your carry in a fund as it grows, and you really own the track record and get to build something. I guess it's riskier in the sense that it requires you to actually perform and generate returns, but has far more upside potential if you do. And to be clear, it's only 'riskier' if there were a path for you to move to a much larger fund and work your way up, but as I suspect that path doesn't exist, you should probably stick to your knitting for a few years.

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Jul 8, 2019
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Funniest
Jul 8, 2019

You would probably want to off yourself if you left your current role to do Big 4 audit.

    • 4
Jul 8, 2019

Thanks for posting. I had a few questions about your current role and your desire to find something else, if that's cool.

How small of deals are you doing, and what's the driver behind you wanting to do larger deals?

What's the problem with doing 1-2 deals per year? Is it just wanting to see more and a wider variety of deals?

What are your long-term goals and why doesn't staying in your current role coincide with those goals?

I am genuinely curious to understand, as my goal, in the short term, is to work for a LMM fund doing only a handful but solid deals each year, so it's always interesting to hear the perspectives of folks in those roles today wanting out.

    • 1
Jul 9, 2019

"One idea I've had is to do CPA => Big 4 => MM PE back office, with front office being the final goal"

Don't do this.

Jul 7, 2019
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