Pre-MBA PE associates - How are you thinking about MBA?

Question to all the incoming pre-MBA associates and current pre-MBA associates (of course post-MBA PE associates also welcomed to chime in).

How are you thinking about the MBA 2-3 years down the line? A quick poll among the analyst class indicates that most of the places people are going to (generally upper-MM PE - 1 to 2 megafunds) are 2-3 year programs with almost everyone going to MBA / lateraling / exiting the industry / moving out west. Of course, some of the firms have "direct promotion" opportunities but let's assume that the vast majority will not have that sort of option in place.

Personally, the more I think about it and talk to people coming out of MBA, the more it's evident that the intrinsic value of an MBA is almost certainly not worth the forgone income and cost of an MBA. I'll venture as far as to say that if you want to stay in finance, even the Stanford GSB / HBS degree really won't add that much value (versus say a direct promote opportunity). Of course these are great for those looking to break into finance or PE, but for those already in the industry (and wants to stay in the industry IB / PE / HF / AM), it adds minimal value and primarily serves as a deliberate structural barrier to allow PE firms to be more selective.

So with that said, does anyone disagree - i.e. does an MBA really add value? Or for those that agree, what have you seen people do to get around the MBA requirement - are people generally successful lateraling? Do people go back to banking?

Comments (38)

 
Apr 6, 2015 - 1:06pm

I think your forgetting that not everyone chooses the MBA to advance their career in the industry they're already in.
Many want to make a career change; many just want to take an extended holiday.

happy to give advice; no asking for referrals please
 
Apr 6, 2015 - 1:31pm

Here you go: http://www.wallstreetoasis.com/forums/to-anyone-considering-an-mba

CompBanker

 
Apr 6, 2015 - 1:50pm

Very helpful - just read it, interesting perspective and very good points. Glad to see that you're doing really well in your pursuits.

Among the points you listed, I find the networking point and the optionality / risk mitigation point you most compelling. I definitely ascribe significant value to education (wouldn't be here without it) - but I fundamentally see business school in a different light compared to say, medical school or to a lesser extent, law school.

What I struggle with is actually the downside risk associated with the MBA because PE / HF recruiting process out of MBA. There is no clear data on this but anecdotally, post-MBA recruiting for PE/HF is still very competitive even at top schools with prior pre-MBA PE experience. If say, a fund guaranteed an offer post-MBA, then I think personally I'll have no problem paying out of pocket for those 2 years.

Interesting trend I've noticed is that a lot of shops (including upper MM and bulge brackets) are starting to at least contemplate a direct-promote program. A lot more are telling their associates that they can return after 2 years. I feel that downside protection will make MBA much more palatable (not to mention enjoyable).

 
Apr 6, 2015 - 3:50pm

MBA is an amazing time where you'll greatly expand your network in a very important way, especially for senior private equity positions from a deal sourcing, diligence, and board member sourcing perspective. The vast majority of large / well-known firms require an MBA. Having been privy to FT placement statistics at most major schools, once you've moved out of the top 4 schools, placement goes way down so business school loses some of the value. If you're just going into pre-MBA PE, just focus on doing your job well. When it becomes time to make a decision, talk to recruiters that you trust about the value of an MBA

 
Apr 6, 2015 - 4:33pm

Gotcha - definitely no intention of getting into a flame war here but... "top 4" - Harvard, Stanford, Wharton... Booth or Columbia? Heard from a friend that PE recruiting (at least in a structured capacity) at Wharton is almost non-existent.

 
Apr 7, 2015 - 11:51am

In 2014, Stanford put 12 percent of its graduates into private equity jobs, a larger percentage than Wharton at the University of Pennsylvania (8.5 percent), Booth at the University of Chicago (5.1 percent) and Columbia (2.4 percent), and a shade less than Harvard (13 percent).

http://www.nytimes.com/2015/04/12/education/edlife/mba-programs-that-get-you-where-you-want-to-go.html?ref=business&_r=0

 
Best Response
Apr 7, 2015 - 2:22pm

Yea it put 12% of its 200-300 class size (36). On the other hand, Wharton sent 8.5% of a nearly 900 class size (80). Do the math son and tell me which school rules PE. Now, I'm not saying that CBS is the strongest school for PE but Booth 5.1% of a much smaller class (20), of which 15 or so go to 3rd-4rd tier PE shops / funds in the midwest. I don't think that compares to the caliber of people in H/S/W/C going to top megafunds and respectable PE firms.

 
Apr 6, 2015 - 6:25pm

You may want to look at the employment report for Wharton. There are plenty of PE firms listed. For PE, structure depends mostly on size; hiring for big firms is structured, for small firms it isn't. Wharton sends about the same % back into PE as entered with prior PE experience. They go to all sizes of firms. I believe the same is true at Harvard, Stanford, Booth, Kellog, etc.

 
Apr 6, 2015 - 8:00pm

1) It's not that I want a "vacation", but I want to try something different and lower-key for awhile, either for 2 years, or for a career. It's definitely not about yacht week or theme parties (because both sound like a shit time to me) but about having more time to focus on what matters to me, on my schedule, while I'm in a place that I can be selfish (i.e. no kids).
2) If I'm going to lateral within finance for a career-track position (and I have been looking), I am going to be very picky about where I end up. So far, none of the lateral opportunities I've seen have been what I wanted, and having two years to really focus on that search could be a really good investment of time.
3) If I decide to stay in finance, it's an industry where network is important, and my undergrad doesn't send many people into finance, so that's another good investment of time.
4) If I decide to not stay in finance, the structured recruiting and classroom experience of business school makes getting the other things I think I want a lot easier than where I sit today. I know this from talking with people who have the job I think I'd want
5) The PE/HF recruiting process out of H/S/W is hard, and requires a lot of legwork, even if you have relevant experience, but I haven't gotten the sense that people who are qualified and diligent come away empty-handed, and I think the employment stats back that up.

Life, liberty and the pursuit of Starwood Points
 
Apr 7, 2015 - 3:32pm

If you enjoy your firm and have an opportunity to get promoted to a post-MBA pe role, it's hard to justify an MBA I think. If you want a career transition or aren't getting looks where you want then it's probably worth it.

I have heard of too many stories of people with great background and pre-mba experience going to HBS and ending up back at MBB or a F500 because they couldn't find a seat. If you are happy where you are career-wise and don't benefit beyond intangibles (e.g. education, network, vacation) than it's hard for me to see the value at least..

This is from a perspective of someone who went to a target undergrad. I totally get it for those who needs the prestige bump after a lesser known undergrad.

 
Apr 7, 2015 - 11:30pm

Indeed it does!

Columbia 8 18 28 6 2 2 10 3 2
NYU 6 12 45 12 4 5 12 3 0

Now let's see the list for Chicago PE firms.

Okay, my apologies. Sarcasm aside:

I wouldn't be surprised if Columbia had better cumulative placement over the past 25 years at non Chicago-based PE funds. Note I say 25 years because that's my estimate of the number of years folks work after their MBAs. Afterall, Booth has only recently shot up in the rankings and prestige. Additionally, Booth has very meaningful regional dominance in Chicago PE, alongside Kellogg. The megafunds cited in that list just don't have large Chicago offices.

I haven't done it, so I can't give you the numbers, but I suspect that if you go take a look at the websites of the large Chicago funds you'll find a complete reversal of the numbers in that article as they relate to Columbia vs. Booth. I do suspect HBS will continue to dominate though. Here are some names off the top of my head, but there are more.

Wind Point Partners
GTCR
Madison Dearborn
Thoma Bravo

CompBanker

 
Apr 7, 2015 - 11:47pm

I think I can agree with Compbanker to a certain extent although I don't know why we he is bringing NYU to the party. I also think that the battle will become fierce between HBS and Wharton in the upcoming years, with Wharton sending more people and HBS having more selectivity, so there will be some trade-offs depending on how you see it.

 
Apr 8, 2015 - 12:33am

I do think Wharton is largely under-estimated on the internet in terms of its PE prowess. I've been through Wharton's resume books. Many of the students come from powerhouse PE shops and have impressive backgrounds. These of the sorts of kids that are going to land the top notch PE jobs available (combined with their equally impressive HBS counterparts). I don't think it is a coincidence either -- Wharton jumps at the candidates from brand name shops with great academics.

I also think you end up with a little bit of cause versus effect here. I'd argue that the impressive background of Wharton's students generates high PE placement rather than the school brand generating PE opportunities for mediocre students. Stated differently, I suspect there is a higher correlation between pre-MBA work experience and PE placement than school attended and PE placement.

CompBanker

 
Apr 8, 2015 - 12:40am

Oh, and, the reason I brought NYU into the mix is because, according to the P&Q statistics that you provided, NYU has a cumulative 99 PE placements compared to Columbia's 79 and Booth's 42. So in order to make the assertion that Columbia is superior to Booth in PE based on these statistics, one must also conclude that NYU is superior to Columbia. I don't know many people who would agree with that.

CompBanker

 
Apr 8, 2015 - 8:23am

Second Year Pre-MBA PE Associate - Go to Business School or Startup? (Originally Posted: 03/06/2015)

I am a long time reader, but first time topic creator. Like the title suggests, I have reached a crossroads in my career path and would really welcome the opinions of some of the more experienced WSO'ers out there.

I am a second year, pre-MBA associate at a MM PE fund and wrapping up my stint this summer. I've already gotten into business school (Wharton / Columbia / Booth-level MBA with some scholarship $). However, I've never been completely sold on the idea of business school. I've been intrigued by startups for quite some time, particularly within the industry vertical that my fund invests in. My question is; does it make sense for me to go to business school or just join a startup in some type of biz dev, operations / financial manager or strategy role? I see B-school more as a reset button down the road if I crash and burn in the startup world.

Spent 2 years in a coverage group at a BB and was an undergrad biz / accounting major at a top 25 university.

And in case anyone was wondering, I'm not interested in hedge funds. Growth equity or VC could be interesting but there's something about joining a fast-growing organization where I am given a lot of responsibility (and some equity!) to really contribute that appeals to me. At B-school welcome weekend, they pushed the entrepreneurship / startup angle hard as most schools do these days. I do think it could be marginally beneficial to attend B-school, meet some people, then join or found a startup.

TLDR, should I go to B-school or should I join a startup?

 
Apr 8, 2015 - 8:25am

Start-up.

If you burn-up then you can re-up with an MBA.
The risk is minimal in the long run and could have a possibility of setting you up for life.
I would say just be pretty thorough in your search for the right start up.

"It is better to have a friendship based on business, than a business based on friendship." - Rockefeller. "Live fast, die hard. Leave a good looking body." - Navy SEAL
 
Apr 8, 2015 - 8:27am

I'm unaware of what size range your firm invests in, but here's an outside of the box thought. Evaluate the portfolio of your fund, identify any companies that are particularly interesting, and propose to one of the partners that you take a position with the portfolio company. This would most likely give you a more senior position than you could get on your own, unless you joined a very early stage start-up and give you more income and an easier lifestyle. However, if your fund invests in larger deals, this advice isn't as valuable.

If that is the case, consider getting the current management of one of the portfolio companies you are responsible for to make an introduction to one of their previous sponsors that invests in smaller deals. There is a chance that you could connect with the prior sponsor and approach them about your interest in working with a portfolio company. They would be excited by the opportunity to have someone with a similar mindset working for one of their companies. This also could serve to get you back into PE without having to go the B-School route and get you back on the career track. Although that may not be as important to you.

Play the long game - give back, help out, mentor - just don't ever forget where you came from. #Bootstrapped
 
Apr 8, 2015 - 8:28am

Thanks, everyone for the advice, and in particular @"EightAceTres" for the thoughtful insight. My fund invests in the middle market and growth equity space, typically, writing checks from $25mm - $200mm. However, there's only one portfolio company we have that I would be interested in joining and I know that the CEO and CFO are fairly difficult personalities. However, speaking to the CEO re prior sponsor ownership is a really interesting idea.

 
Apr 8, 2015 - 8:31am

Mark Suster has spoken about this at various occasions - one is on his blog here http://www.bothsidesofthetable.com/2009/09/08/are-mbas-necessary-for-start-ups-or-vc/

If you want to work at a startup or (eventually) in VC, I would try to join a startup/portfolio company instead of going for an MBA. I believe the operational experience you'll get will be more beneficial than an MBA and you'll have more career flexibility without taking on the debt.

 
Apr 8, 2015 - 8:32am

PE associate to MBA to what position at a PE shop? (Originally Posted: 11/07/2014)

I know the common path is to become a PE associate after your stint in banking and then go to business school to get an MBA. But after getting your MBA, if you return to PE are you stuck in the same associate rank or do you usually become something like a senior associate with added compensation and responsibilities? Know that every firm is different, but wanted to find out what the de fact standard is.

 
Apr 8, 2015 - 8:35am

As others said, it depends, but generally I see people go from IB to PE to M7 to PE as senior associates. Occasionally, they will land in a VP role if they have 3+ years of experience pre-MBA.

Comp is higher, responsibilities are greater.

 
Apr 8, 2015 - 8:36am
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