Private equity is a broad, loosely used description of an industry in which firms focus on investing money into privately owned companies, and, at times, invest and hold ownership positions in publicly traded firms. Depending on the types of private investments PE firms are focused on, the dynamics and qualifications for pursuing a career in private equity can differ enormously. Below we have segmented the private equity industry into 3 somewhat simplified groups, and have highlighted the different skill sets considered most important for each career path. Please keep in mind, while no Tuck student would be expected to have mastered all these skills, the examples should serve as guidelines to use when spinning your own career experiences in a manner that best resonates with the PE firm interviewing you.
Private Equity Firms: Buy-Out
- These PE groups are typically involved in purchasing an entire company- or large ownership position in a larger company. Often debt is used to help fund the purchase of an entire company along w/ some equity that the PE group invests (LBO transaction).
- Given the frequent desire to use debt, these PE groups tend to focus on more mature, cash-flow-steady companies that are larger in nature.
- Given the buy-out nature of these firms, they tend to staff greater levels of junior and mid-level professionals than other private equity firms.
- These PE firms typically leverage junior professionals to model out transactions, perform due diligence on transactions. Most PE firms hire former investment bankers and similar corporate finance professionals (accounting, commercial banking) since these professionals' backgrounds are well suited for such positions.
- These firms also hire management consultants (from time to time) that have good strategy skills, and have demonstrated the intelligence to quickly pick up the finance and accounting skills that their background has lacked. Although, many times management consultants are hired in more senior positions at these firms.
Venture Capital Firms: Early Stage
- These VC groups focus on giving start-up companies their first and second rounds of professionally invested growth capital/financing.
- They tend to focus on specific industries (software, hardware, telcom, healthcare, etc.) since it's important to understand the dynamics and potential of a new company addressing a newly emerging market.
- These VC groups tend to be small in nature, and the majority of their staff is at the partner level- they don't hire many junior level professionals, and even fewer mid-level professionals.
- These VC groups like to hire professionals with operations, management and strategy experience in a given vertical industry upon which the VC group is focusing. This is generally a different skill set than the skill set for which buy-out type PE firms want.
- Post MBA, early-stage VC positions are more difficult to find than a position at a PE firm, not that a PE firm position is easy in the first place!
- If you find a firm that does hire junior level staff, keep in mind that they tend to hire folks on an "as-needed" basis, which is typically every 2-3 years and is not on an annual, routine basis like many investment banks and management consulting firms.
Venture Capital Firms: Mid-to-Late Stage
- These VC groups focus on investing growth capital in later financing rounds to smaller companies that are evolving past the "start-up" phase.
- These VC groups, like early stage investors, tend to focus on specific industries software, hardware, telcom, healthcare, etc.) since it's important to understand the dynamics and potential of a new company addressing a newly emerging market.
- In many respects, these firms invest more like early stage VC firms, but do tend to hire more junior and mid-level investment professionals.
- Please keep in mind, all of these statements above are generalities and there are always exceptions.
