Hi guys:
A common phrase I’ve heard in PE is that one needs to “get reps”; even if one learns all the knowledge from modeling training /case study prep, one will still lack “real deal intricacies “.
They are sound very reasonable. Can those with experience share a little about how the way they think about a deal changed after they got more reps? Is it a better sense of what work to prioritize? Better skills at working with advisors? What does “getting more reps” chiefly change/improve in you? Also, can you share a bit about what “real deal intricacies” concretely look like please? (I can only think of how to adjust the financials, conduct due diligence, and manage timelines, but I’m sure there’s more).
Thank you
I've seen my skills improve after each deal. It's a bit different though since I'm in VC, but I'd say that it's quite similar in PE.
Sourcing + Industry Knowledge -> When you spend time understanding a company and an industry, you'll build deep knowledge that enables you to know exactly what sort of startup/company (with what particular set of metrics) would be a great investment in that industry. You get how the value chain works, where the white space is for companies, and where pockets of opportunity to invest in may lie.
Initial presentation to IC -> When you go through the process of running prospective deals by the investment committee every Monday morning, you get a feel for what the IC members like to see in an investment. You understand that Partner A has a hard-on for unit economics, or that Partner B always likes to focus on how an investment could go wrong, or that Partner C is the gatekeeper and that the IC's decision tends to shift based on his/her position.
Due diligence -> After receiving a couple of unbalanced "balance sheets", nothing really surprises you. You know what to cover - legal (articles of incorporation, company structure, board of directors, board meeting minutes, etc.), financial (from consolidating financials across subsidiaries, to checking invoices, receipts, building a financial model + returns analyses etc.), technical (hire a tech consultant lol), operational (which metrics will constitute the key success factors for this startup/company? how much should be invested to achieve these KSFs?, etc.)
Investment Execution -> You work with the investment management + legal + compliance teams enough times, you'll know what they'll push back on, you'll know how much leeway you can get, you'll know what checkpoints you have to go through to get a deal through, you'll know how to manage capital calls, negotiate termsheets and the actual SPA's.
Post-investment -> You've made a couple of investments, you monitor and track them, see where you can add value, add value, see which ones f up, why they f up, what red flags you didn't see that are now vividly apparent, you see which ones become could-have-beens, or rocketships with 10x + MOIC, how difficult it is to massage the egos of stakeholders when you're trying to exit through a trade sale or an IPO etc.
You get better by doing it live, just like in sports, the performing arts, drawing, whatever. That's how your partners at the VC/PE firm you're working at got there.
Wow, this is great! Thank you so much!
Hears that these skills are gained via actual experience.... immediately looks for the answers from someone else online.
May have missed the point there, super chief.
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