Smaller Growth Equity Shops vs BB IB

My end goal is to end up at one of the larger GE/late-stage VC funds (think GA/Insight/TCV/MF Growth). Would I be in a better position to move from a Stripes/Lead Edge type of firm or start off in BB IB and recruit for GE associate positions. It seems like ex-IB is common for the larger funds, but I also know that GE is very hard to break into. So wondering if every GE offer is better than IB (even the very small funds), assuming one wants to be an investor.  

Comments (19)

 
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  • Analyst 1 in PE - Growth
Dec 24, 2020 - 4:34pm

Currently at one of those larger funds you mentioned and from what I have seen at my firm, you would have a pretty similar chance of landing an associate role from a slightly smaller growth fund or BB/EB IB (I would definitely try for an M&A or TMT type group if you go the IB route though). If you try to lateral beyond the associate level (i.e. VP, Principal, etc.) you would definitely want to come from another growth fund. Since your end goal is growth, my advice would be to try and get into a growth fund out of college. It sets you up equally as well in shorter-term recruiting and much better in the long term in the event that you start in IB and don't successfully lateral to a growth associate role. Also, for what it's worth, I personally would rather start out at a shop like Lead Edge than the bigger fund I'm at. A lot more potential for rapid upward mobility given the lower headcount and rapid AUM growth.

 
  • Analyst 1 in IB-M&A
Dec 24, 2020 - 9:35pm

Yeah, been hearing this a lot recently as well with pursuing GE out of undergrad as opposed to BB IB if your long term goal is growth/vc. Also hearing a lot about Lead Edge and seems like the general consensus with lower headcount and aum growth. 

 
  • Intern in IB - Ind
Dec 24, 2020 - 5:07pm

That's what I'm thinking, especially with just 2 years as an analyst. I assume GE will give me solid finance skills, as I've heard that many analysts get to work on deals they source. I would definitely take a GE shop that has a history of upward mobility. Do you know how common this is at GE shops? I don't want to end up at a place where I'm stuck at the associate role, but struggle to lateral somewhere else bc the fund doesn't have a strong name. 

 
Dec 24, 2020 - 5:22pm

I know you're probably thinking you'll be at the same company for a few years, but I haven't seen many people sit in the same seat for very long. Theres lots of newer opportunities in GE as the space is opening up slowly. You can always move downstream into VC too if you realize the deal process is a bit dry and would rather focus on sourcing/due diligence reports. Plus there always an exit to the corporate side to a high growth PortCo or other VC/GE back company. If you want to stay in GE, you just need to be good at what you do... If you're good, another fund will always be willing to take a chance on you.

 

Just some background - I did a summer of VC before going into banking and probably had the most fun with the job that I've ever experienced. Constant facetime with entrepreneurs, deep analysis of tech / industries / competitive landscapes / scaling opps / management / etc. - even got to do some deeper dives on IP and worked with some lawyers on it. A good 65% of my time was hopping on the phone with new companies, attending tech conferences (and getting treated like a king with free food and drink hahah). 25% was due diligence for potential investments. And the remaining time was working with PortCos that were experiencing rough periods - very interesting to help them out.

 

The time I've spent in banking I can only describe as boring. I've spent the past several months outputting useless charts to PPTs for clients that didnt ask for materials or pitching insane ideas that aren't going to go anywhere. My modelling skills are significantly better but thats no thanks to the associates I've been working with - probably could've learned it on my own anyways. Tons of fake deadlines and useless value add comments. Shitty Christmas present even though we've been working harder than any other year before us (significantly understaffed). No independent thought either. The only real thing I've learned is how much of a simp everyone senior to me is - the industry beats you down and takes away time for real interests or hobbies. 
 

TDLR: skip banking if you can. You'll be rich regardless later in life and can have a much more interesting career by avoiding it.

 
  • Associate 1 in PE - LBOs
Dec 25, 2020 - 3:12pm

A variation of this question comes up somewhat regularly, and like others have said I would suggest doing GE out of UG if you can. If you end up at a place like Stripes you may end up liking it enough to stay and won't even need to lateral! IB won't close any doors obviously, and working in a TMT-focused group would be even better, but getting experience on the principal side of things will always fare well if you want to stay on the buy-side for the long haul. Best of luck!

 
Jan 9, 2021 - 6:49am

I'll just add that people ask this about vanilla LBO PE and to those folks I say it really depends where you're going (ie MF analyst program, Audax etc.). But if you're going to a known GE shop, even if it's not a larger fund but is at least known by name, then by all means take it. Why would a larger GE fund not look at you seriously if you can hit the ground running harder than your banking counterparts?

 
  • Analyst 1 in PE - Growth
Jan 9, 2021 - 8:33pm

100%. JMI has been a consistent player in the space for decades. Lead Edge has become one of the most respected and fastest-growing growth funds since it was started ~10 years ago. And even though I am less familiar with Silversmith, it seems highly regarded, particularly within the healthcare space.

 
Jan 14, 2021 - 8:54am

I'd say go banking if it's a top shop like MS Menlo, GS TMT, Q, Allen, etc. Growth equity is changing and it's not just standard equity investing. There's a lot of complicated debt instruments that are being introduced. In general, I think the shops you mentioned are strict cold calling. I think having transaction expertise helps a lot. I'm in VC previously from consulting and it's a big difference. 

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