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# Switching into PE/VC?

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SVP
Joined: 04 Dec 2007
Posts: 1689
Schools: Kellogg '11
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23 Jul 2008, 21:55
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Hi folks,
Out of curiosity, how does one do a career switch from something like MC to PE/VC?

- having an I-Banking background can help with recruiting process during school
- those who want to switch into IB from something like MC can do so with some focused networking, prep courses prior to starting, strong math/finance grades

Does the same apply to PE/VC?

Thanks,
ac.
SVP
Joined: 11 Mar 2008
Posts: 1634
Location: Southern California
Schools: Chicago (dinged), Tuck (November), Columbia (RD)
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23 Jul 2008, 22:03
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ac8706 wrote:
Hi folks,
Out of curiosity, how does one do a career switch from something like MC to PE/VC?

- having an I-Banking background can help with recruiting process during school
- those who want to switch into IB from something like MC can do so with some focused networking, prep courses prior to starting, strong math/finance grades

Does the same apply to PE/VC?

Thanks,
ac.

3 scenarios:

1) Your pre-MBA experience is at a top bulge bracket bank or at McKinsey/Bain/BCG - You will have to network like crazy, but it should be possible out of the M7+Tuck schools. It is by no means guaranteed.

2) Your pre-MBA experience is not at a top bulge bracket bank or at McKinsey/Bain/BCG - You will have to network like crazy, and even then it is very unlikely. It is probably not worth the effort unless you are at H/S/W.

3) Your pre-MBA experience is at a reputable PE shop - you are likely sponsored by your PE firm to get your MBA from H/S/W and you will be returning back to your firm at the Vice President level.

This is of course considering that you are speaking of breaking into PE/VC directly after your MBA. It also assumes that you are speaking of reputable PE/VC firms with histories of good returns - and not a start-up or small-cap PE shop (these will be a lot easier to get into).

The biggest part of this equation, as rhyme mentioned once I believe, is the risk of trying to break into PE if you fall into categories 1) or 2) above. All of your classmates will be lining up investment banking jobs at top banks and you will have to wait until the late Spring to even start recruiting for PE summer internships. Even then, you may or may not get one.
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GMAT Club Legend
Affiliations: HHonors Diamond, BGS Honor Society
Joined: 05 Apr 2006
Posts: 5926
Schools: Chicago (Booth) - Class of 2009
GMAT 1: 730 Q45 V45
Followers: 294

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24 Jul 2008, 06:56
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PE/VC recruiting is basically this:

If "You were in PE/VC before an MBA"=TRUE {
solid=like a rock;
else
solid=like water;
}

If solid=like a rock {
Then
You have a Network = TRUE;
Else {
You have a Network = FALSE;
}

If You have a Network = TRUE {
Then
PE/VC Job Probability Function = .0009;
Else
PE/VC Job Probability Function = 1x10^-42;
}

Recruiting_Begins();

If solid=YOU SUCK {
while (calls<10,000) {
Foreach(Call(EveryoneInTheWorld())="ACTUAL CONVERSATION")) { calls++; }
}
Pray->God(); // Warning call to null pointer? There is no god?
Backup_Job_Plan->Trash(NOW());
Watch_Everyone_Else_GET(IB);
Watch_Everyone_Else_GET(MC);
Watch_Everyone_Else_GET(GM);
if (male = true) {
Make_Of_Steel(Balls);
else {
Dig_In(Heels);
}
Job_Offer=PE/VC Job Probability Function*calls
}

In short, landing a PE/VC gig is 98% who you know. It's ALL networking.

The biggest issue frankly is that you have to be 120% commited. PE/VC recruit in spring - after IB, after MC, after GM, marketing, hedge funds, commercial finance, leadership programs, after basically everything. To do PE you have to roll the dice - and roll with a big bet. Its not for the risk averse.
SVP
Joined: 30 Apr 2008
Posts: 1888
Location: Oklahoma City
Schools: Hard Knocks
Followers: 39

Kudos [?]: 524 [0], given: 32

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24 Jul 2008, 07:01
Rhyme,

You never cease to amaze me. As a programmer too, I think this is one of the most creative posts I've ever seen!

Allen
rhyme wrote:
PE/VC recruiting is basically this:

If "You were in PE/VC before an MBA"=TRUE {
solid=like a rock;
else
solid=like water;
}

If solid=like a rock {
Then
You have a Network = TRUE;
Else {
You have a Network = FALSE;
}

If You have a Network = TRUE {
Then
PE/VC Job Probability Function = .0009;
Else
PE/VC Job Probability Function = 1x10^-42;
}

Recruiting_Begins();

If solid=YOU SUCK {
while (calls<10,000) {
Foreach(Call(EveryoneInTheWorld())="ACTUAL CONVERSATION")) { calls++; }
}
Pray->God(); // Warning call to null pointer? There is no god?
Backup_Job_Plan->Trash(NOW());
Watch_Everyone_Else_GET(IB);
Watch_Everyone_Else_GET(MC);
Watch_Everyone_Else_GET(GM);
if (male = true) {
Make_Of_Steel(Balls);
else {
Dig_In(Heels);
}
Job_Offer=PE/VC Job Probability Function*calls
}

In short, landing a PE/VC gig is 98% who you know. It's ALL networking.

The biggest issue frankly is that you have to be 120% commited. PE/VC recruit in spring - after IB, after MC, after GM, marketing, hedge funds, commercial finance, leadership programs, after basically everything. To do PE you have to roll the dice - and roll with a big bet. Its not for the risk averse.

_________________

------------------------------------
J Allen Morris
**I'm pretty sure I'm right, but then again, I'm just a guy with his head up his a$$. GMAT Club Premium Membership - big benefits and savings Director Joined: 02 Jan 2008 Posts: 597 Location: Detroit, MI Followers: 3 Kudos [?]: 29 [0], given: 0 Re: Switching into PE/VC? [#permalink] ### Show Tags 24 Jul 2008, 08:06 Rhyme, Another classic, thanks for conveying the message in a creative medium... So... how many calls did you make to land your gig? ~Sam GMAT Club Legend Joined: 10 Apr 2007 Posts: 4318 Location: Back in Chicago, IL Schools: Kellogg Alum: Class of 2010 Followers: 89 Kudos [?]: 746 [0], given: 5 Re: Switching into PE/VC? [#permalink] ### Show Tags 24 Jul 2008, 09:42 Remember there is always dumb luck for a few people in any job search. However, I would say PE/VC/HF jobs arent the type people typically fall into...maybe a few at H/S do but at the other schools probably not so much. _________________ Kellogg Class of 2010...still active and willing to help. However, I do not do profile reviews, don't offer predictions on chances and am far to busy to review essays, so save the energy of writing me a PM seeking help for these. If I don't respond to a PM that is not one of the previously mentioned trash can destined messages, please don't take it personally I get so many messages I have a hard to responding to most. The more interesting, compelling, or humorous you message the more likely I am to respond. GMAT Club Premium Membership - big benefits and savings Manager Joined: 25 Jan 2008 Posts: 166 Location: San Francisco, CA Schools: Wharton, Chicago Followers: 1 Kudos [?]: 12 [3] , given: 0 Re: Switching into PE/VC? [#permalink] ### Show Tags 24 Jul 2008, 10:24 3 This post received KUDOS That was a funny post, Rhyme, I wonder if it was funnier if you have a background in programming languages. I think there needs to be a distinction made between PE and VC. While in actuality VC is a subset of PE, the term PE nowadays almost always refers to LBO PE firms. PE hiring is becoming a little more institutionalized than VC ever will be, but it still is quite unlike IB/MC or other traditional career paths. For VC I think the “network” angle is as important as rhyme says it is, I really don’t know. However, for LBO PE it’s a combination of that plus your previous experience and pedigree that will get you interviews, usually via recruiters. To get jobs in LBO PE you are competing with those who have pre-MBA work experience doing (in order of general competitiveness, according to me): 1) BB IB / Top MC + Mid-Large Cap PE 2) Mid-Large Cap PE 3) BB IB / Top MC 4) Small no name PE / MM IB 5) Small no name IB / Non-Top MC / Big 4 Transaction or Due Diligence 6) Industry / Corp Development / Big 4 Other 7) All other career switchers Keep in mind that almost all of these people will also have good academic pedigree including: a respected undergrad (high GPA), test scores (SAT + GMAT), and a top MBA. It is possible that pedigree, e.g. HBS MBA, could help you jump a level relative to the above ordering, but the problem is that pedigree is already there in almost all of those groups. The good news is that the smaller and less established the PE firm, the less this ordering applies (not because they would rather take someone from #6 and #7 over #1 and #2, but because there aren’t so many of #1 and #2 to go around.) While there might seem to be a good amount of PE shops, they are staffed very lean and definitely don’t want to train their junior professionals. In my limited experience, I’ve heard a lot of guys that are in #5 or below and not going to a H/S/W say that they want to do PE and I have to refrain from telling them that they are pretty unlikely to get a job in PE, because I don’t want to be “that guy”. But the reality is that it’s very, very tough. However, networking can be the great equalizer. I would encourage all those from #5 and below to give considerable thought to doing IB first before putting their eggs in the PE basket. Current Student Joined: 27 Mar 2008 Posts: 416 Schools: Kellogg Class of 2011 Followers: 2 Kudos [?]: 42 [0], given: 1 Re: Switching into PE/VC? [#permalink] ### Show Tags 24 Jul 2008, 15:58 Great post rhyme. Pray->God(); // Warning call to null pointer? There is no god? Hahaha.. how do you begin to come up with this stuff? rhyme wrote: PE/VC recruiting is basically this: If "You were in PE/VC before an MBA"=TRUE { solid=like a rock; else solid=like water; } If solid=like a rock { Then You have a Network = TRUE; Else { You have a Network = FALSE; } If You have a Network = TRUE { Then PE/VC Job Probability Function = .0009; Else PE/VC Job Probability Function = 1x10^-42; } Recruiting_Begins(); If solid=YOU SUCK { while (calls<10,000) { Network_Like_Mad(Every Day, All The Time); Foreach(Call(EveryoneInTheWorld())="ACTUAL CONVERSATION")) { calls++; } } Pray->God(); // Warning call to null pointer? There is no god? Backup_Job_Plan->Trash(NOW()); Watch_Everyone_Else_GET(IB); Watch_Everyone_Else_GET(MC); Watch_Everyone_Else_GET(GM); if (male = true) { Make_Of_Steel(Balls); else { Dig_In(Heels); } Job_Offer=PE/VC Job Probability Function*calls } In short, landing a PE/VC gig is 98% who you know. It's ALL networking. The biggest issue frankly is that you have to be 120% commited. PE/VC recruit in spring - after IB, after MC, after GM, marketing, hedge funds, commercial finance, leadership programs, after basically everything. To do PE you have to roll the dice - and roll with a big bet. Its not for the risk averse. SVP Joined: 04 Dec 2007 Posts: 1689 Schools: Kellogg '11 Followers: 14 Kudos [?]: 194 [0], given: 31 Re: Switching into PE/VC? [#permalink] ### Show Tags 24 Jul 2008, 18:16 Haha rhyme - that's great! This brought to mind some other threads (think they were rhyme's) about the sequence of recruiting and how it works - waiting for PE/VC until the very end of the year must be ridiculously tough unless you're fairly certain that you'll land a position! rhyme wrote: PE/VC recruiting is basically this: If "You were in PE/VC before an MBA"=TRUE { solid=like a rock; else solid=like water; } If solid=like a rock { Then You have a Network = TRUE; Else { You have a Network = FALSE; } If You have a Network = TRUE { Then PE/VC Job Probability Function = .0009; Else PE/VC Job Probability Function = 1x10^-42; } Recruiting_Begins(); If solid=YOU SUCK { while (calls<10,000) { Network_Like_Mad(Every Day, All The Time); Foreach(Call(EveryoneInTheWorld())="ACTUAL CONVERSATION")) { calls++; } } Pray->God(); // Warning call to null pointer? There is no god? Backup_Job_Plan->Trash(NOW()); Watch_Everyone_Else_GET(IB); Watch_Everyone_Else_GET(MC); Watch_Everyone_Else_GET(GM); if (male = true) { Make_Of_Steel(Balls); else { Dig_In(Heels); } Job_Offer=PE/VC Job Probability Function*calls } In short, landing a PE/VC gig is 98% who you know. It's ALL networking. The biggest issue frankly is that you have to be 120% commited. PE/VC recruit in spring - after IB, after MC, after GM, marketing, hedge funds, commercial finance, leadership programs, after basically everything. To do PE you have to roll the dice - and roll with a big bet. Its not for the risk averse. SVP Joined: 04 Dec 2007 Posts: 1689 Schools: Kellogg '11 Followers: 14 Kudos [?]: 194 [0], given: 31 Re: Switching into PE/VC? [#permalink] ### Show Tags 24 Jul 2008, 18:36 wow thanks cougar! The hierarchy is esp helpful - I didn't realize that there was even a perceived difference btwn previous experience in IB/PE and the firms themselves. It's also interesting to hear that those without previous PE or IB experience are at such a disadvantage when trying to break in. Is the reasoning (from the company perspective) really that they don't want to train newbies? Is the training that complex or costly? It's also good to note that doing IB opens so many doors - it can really be a stepping stone for many careers! cougarblue wrote: That was a funny post, Rhyme, I wonder if it was funnier if you have a background in programming languages. I think there needs to be a distinction made between PE and VC. While in actuality VC is a subset of PE, the term PE nowadays almost always refers to LBO PE firms. PE hiring is becoming a little more institutionalized than VC ever will be, but it still is quite unlike IB/MC or other traditional career paths. For VC I think the “network” angle is as important as rhyme says it is, I really don’t know. However, for LBO PE it’s a combination of that plus your previous experience and pedigree that will get you interviews, usually via recruiters. To get jobs in LBO PE you are competing with those who have pre-MBA work experience doing (in order of general competitiveness, according to me): 1) BB IB / Top MC + Mid-Large Cap PE 2) Mid-Large Cap PE 3) BB IB / Top MC 4) Small no name PE / MM IB 5) Small no name IB / Non-Top MC / Big 4 Transaction or Due Diligence 6) Industry / Corp Development / Big 4 Other 7) All other career switchers Keep in mind that almost all of these people will also have good academic pedigree including: a respected undergrad (high GPA), test scores (SAT + GMAT), and a top MBA. It is possible that pedigree, e.g. HBS MBA, could help you jump a level relative to the above ordering, but the problem is that pedigree is already there in almost all of those groups. The good news is that the smaller and less established the PE firm, the less this ordering applies (not because they would rather take someone from #6 and #7 over #1 and #2, but because there aren’t so many of #1 and #2 to go around.) While there might seem to be a good amount of PE shops, they are staffed very lean and definitely don’t want to train their junior professionals. In my limited experience, I’ve heard a lot of guys that are in #5 or below and not going to a H/S/W say that they want to do PE and I have to refrain from telling them that they are pretty unlikely to get a job in PE, because I don’t want to be “that guy”. But the reality is that it’s very, very tough. However, networking can be the great equalizer. I would encourage all those from #5 and below to give considerable thought to doing IB first before putting their eggs in the PE basket. SVP Joined: 11 Mar 2008 Posts: 1634 Location: Southern California Schools: Chicago (dinged), Tuck (November), Columbia (RD) Followers: 8 Kudos [?]: 197 [0], given: 0 Re: Switching into PE/VC? [#permalink] ### Show Tags 24 Jul 2008, 19:22 ac8706 wrote: wow thanks cougar! The hierarchy is esp helpful - I didn't realize that there was even a perceived difference btwn previous experience in IB/PE and the firms themselves. It's also interesting to hear that those without previous PE or IB experience are at such a disadvantage when trying to break in. Is the reasoning (from the company perspective) really that they don't want to train newbies? Is the training that complex or costly? It's also good to note that doing IB opens so many doors - it can really be a stepping stone for many careers! I'm not 100% sure on this, but my guess would be that their philosophy is "why train people if we don't have to?" Most of the large PE firms only hire a handful of new people every year, and smaller/medium size PE firms may only hire 1-2 people the whole year. With all of the people at the top of the "heirarchy" interested in PE, they can cherry pick whoever they please. Supply exceeds demand - and by a lot. _________________ Check out the new Career Forum http://gmatclub.com/forum/133 Current Student Joined: 18 Jun 2008 Posts: 228 Followers: 2 Kudos [?]: 56 [0], given: 3 Re: Switching into PE/VC? [#permalink] ### Show Tags 24 Jul 2008, 19:26 I don't quite understand the appeal of PE/VC (well, I don't know much about them period), can someone explain? Why is the demand so high? SVP Joined: 11 Mar 2008 Posts: 1634 Location: Southern California Schools: Chicago (dinged), Tuck (November), Columbia (RD) Followers: 8 Kudos [?]: 197 [0], given: 0 Re: Switching into PE/VC? [#permalink] ### Show Tags 24 Jul 2008, 19:38 jasonc wrote: I don't quite understand the appeal of PE/VC (well, I don't know much about them period), can someone explain? Why is the demand so high? Interesting, fulfilling, and challenging work (for most) coupled with outsized compensation. _________________ Check out the new Career Forum http://gmatclub.com/forum/133 SVP Joined: 04 Dec 2007 Posts: 1689 Schools: Kellogg '11 Followers: 14 Kudos [?]: 194 [0], given: 31 Re: Switching into PE/VC? [#permalink] ### Show Tags 24 Jul 2008, 19:57 terp06 wrote: jasonc wrote: I don't quite understand the appeal of PE/VC (well, I don't know much about them period), can someone explain? Why is the demand so high? Interesting, fulfilling, and challenging work (for most) coupled with outsized compensation. Yup what terp said Current Student Joined: 18 Jun 2008 Posts: 228 Followers: 2 Kudos [?]: 56 [0], given: 3 Re: Switching into PE/VC? [#permalink] ### Show Tags 24 Jul 2008, 21:09 terp06 wrote: jasonc wrote: I don't quite understand the appeal of PE/VC (well, I don't know much about them period), can someone explain? Why is the demand so high? Interesting, fulfilling, and challenging work (for most) coupled with outsized compensation. challenging & outsized compensaton I can see interesting & fulfilling... can you be more specific? SVP Joined: 11 Mar 2008 Posts: 1634 Location: Southern California Schools: Chicago (dinged), Tuck (November), Columbia (RD) Followers: 8 Kudos [?]: 197 [21] , given: 0 Re: Switching into PE/VC? [#permalink] ### Show Tags 24 Jul 2008, 21:32 21 This post received KUDOS 1 This post was BOOKMARKED jasonc wrote: terp06 wrote: jasonc wrote: I don't quite understand the appeal of PE/VC (well, I don't know much about them period), can someone explain? Why is the demand so high? Interesting, fulfilling, and challenging work (for most) coupled with outsized compensation. challenging & outsized compensaton I can see interesting & fulfilling... can you be more specific? The way I see it, being in venture capital or a growth-oriented private equity firm is like being a risk-free entrepeneur who runs 5 companies rather than 1. VC/PE firms will invest in an early to mid-stage company, and they will then take a seat or 2 or 3 on the board of directors of the company and they will advise the management team on best practices, growth, M&A, etc. They will leverage their firms contacts to help entrepeneurial companies build a more corporate-type infrastructure, get appropriate lawyers, get good management practices in place, etc. Their function can actually be described as somewhat similar to management consultants - except that they have their skin in the game and a (generally large) stake in the company. Larger PE firms that do leveraged buyouts are generally focused on buying larger, established companies where they see an opportunity for either financial engineering or fundamental changes that would significantly increase the value of the company. People with top investment banking backgrounds generally thrive at these firms. Junior-level people at these firms generally get paid attractive salaries and have a lot of exposure to entrepeneurial companies and ventures. They can leverage this experience to start their own entrepeneurial PE/VC backed venture in the future, or to work their way up to partner at the firm. Partners at these firms generally get paid carried interest on the investments. Let's say that a PE firm raises a 1 billion fund. The typical fee structure is 2/20. Meaning that 2% of the 1 billion (20 million) is a management fee that is generally used to pay base salaries and bonuses, office/support costs, etc. and 20% is the portion of the returns that the partners will split up between themselves. Assuming that they return 25% to their investors (250 million), they would get to keep 20% of this (or 50 million) and divide this up between the partnership (at a fund of this size, most likely 4-5 partners). This is taxed at the capital gains rate (15%) rather then normal income tax rates (which is the cause of a lot of uproar on Capitol Hill currently, and I believe the capital gains rate is changing to 20%). Not sure if that all made sense. I'm tired. I think a few others on this board have more knowledge about this than I do and they can and should feel free to chime in with their opinions. _________________ Check out the new Career Forum http://gmatclub.com/forum/133 Current Student Joined: 18 Jun 2008 Posts: 228 Followers: 2 Kudos [?]: 56 [0], given: 3 Re: Switching into PE/VC? [#permalink] ### Show Tags 24 Jul 2008, 23:13 that helped alot +1 GMAT Club Legend Status: Um... what do you want to know? Joined: 04 Jun 2007 Posts: 5464 Location: SF, CA, USA Schools: UC Berkeley Haas School of Business MBA 2010 WE 1: Social Gaming Followers: 72 Kudos [?]: 392 [0], given: 14 Re: Switching into PE/VC? [#permalink] ### Show Tags 25 Jul 2008, 02:18 good stuff terp06, you are wise beyond your years. _________________ **************************** GMAT Club Knowledge Vault: http://gmatclub.com/forum/123 Haas Ambassador http://gmatclub.com/forum/128-t62555 Kryzak's Profile: http://gmatclub.com/forum/111-t56286 Member Essays: http://gmatclub.com/forum/103-t50969 Current Student Joined: 14 Apr 2008 Posts: 453 Schools: F2010 - HBS (R1 - denied w/o interview ), INSEAD (R1 - admitted), Wharton (R1 - waitlisted & ding), Ivey (R2 - admitted w/ 60% tuition) WE 1: 3.5yrs as a Strategy Consultant - Big 4 Followers: 14 Kudos [?]: 36 [0], given: 16 Re: Switching into PE/VC? [#permalink] ### Show Tags 25 Jul 2008, 06:27 thanks for the succinct exlpanation - terp06 _________________ INSEAD Sept 2010 Interview Invite Nov 5, 2009 Admit & Matriculating Wharton Sept 2010 Interview Invite Oct 30, 2009 Waitlisted & Ding Harvard Sept 2010 Ding without Interview Ivey May 2010 Interview Invite Nov 23, 2009 Admit +$$

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Location: Detroit, MI
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25 Jul 2008, 06:43
Good explanation Terp.. thanks for the help!
Re: Switching into PE/VC?   [#permalink] 25 Jul 2008, 06:43

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