Career on Finance- MBA

Question

Hi,
 Could someone explain me in detail the different sectors of MBA Finance (1. Private Equity 2. Venture Capital 3. Corporate Finance 4. Investment Banking 5. Investment Management). How do you select which one is correct for you? I would like to know each sectors in terms of subjects you study in mba, type of jobs, what you actually do in the job, the salary, the stress levels, work life balance, demand and the best country to do it. Thanks in advance.

SiaAdmissions · Answer

munch5 , There is a perfect tool that can give you broad details on all these questions, https://www.google.com. I'd recommend coming back to this forum for answers on finer points that were not discovered in your research. Best of luck!

pgs · Answer

I'll chime in here since I'm familiar with 4 out of the 5 sectors you listed:

- Corporate Finance: this is working for a company in their finance department, and helping them with things like budgeting, forecasting, looking at variance to actuals, and determining how the company's limited capital should be allocated across all the competing projects. I would say the hours are the best here, especially if you're working for a big corporation (in which case it's probably the typical 9-5). I've done corp fin for startups in silicon valley and the hours there can be worse, but still nowhere like the hours in investment banking. Of course, the pay is generally lower as well. If you join the right startup though and it does well, your stock options could be meaningful and you could actually make out pretty well.

- Investment Banking: to join as an MBA, your best chance is to intern as a summer associate the summer between your 1st and 2nd year of business school. You would recruit for this role during the 1st year of your MBA program, about halfway through your first year. The reason this is your best chance is because 80-90% of the full-time MBA offers are given to summer associates who performed well during their internship. If you're not a returning intern, you'd have to recruit during the 2nd year of your MBA for one of the few remaining spots. This can be much tougher. In terms of what you do on the job, at a high level you're either advising companies on mergers & acquisitions (the buying and selling of companies), or on capital raising (either through equity deals like IPOs or follow-ons, or through debt deals by borrowing money). Hours are bad, probably 80-100 hours a week on average, but as an MBA grad you'll make $200k+ right out of school. Stress level can be high, and work life balance is close to non-existent but gets better as you become more senior. If you want a chill job, this is not going to be it. If you want a high paying job that gives you a ton of exit opportunities to do whatever you want afterwards, and you're willing to put your head down and work your ass off for a couple of years, then this could be a good fit for you.

- Venture Capital: venture capital firms invest in early stage companies, usually in highly innovative industries like technology. Your job as a VC investor is to network like crazy, meet as many interesting companies as possible, and try to identify the ones that are going to become huge. Then, you have to convince the founders of those companies to take your money in exchange for selling you a portion of their company. Your VC firm may also get a seat on their board so that you can influence the strategic direction of the company. To be successful, you have to be an extrovert and enjoy meeting new people, enjoy networking, and enjoy sourcing deals. You will do less hardcore financial modeling than investment bankers and private equity guys because earlier stage companies usually aren't worth modeling out in detail (it's too early in the company's lifecycle to be able to model anything with precision). The hours are generally better than ibanking and private equity hours, but will fluctuate and be much busier when there's a live deal going on. If you have investment banking experience prior to your MBA, it could be helpful. Your pay is going to vary depending on the size of the fund you work for, because VC firms make money by charging a management fee (usually 2% of the fund size) and a cut of the profits (usually 20%). The bigger the fund, the higher the pay.

- Private Equity: very similar to VCs, but for later stage companies that are much more mature. Also, private equity companies often acquire the entire company (or at least take a majority controlling interest), whereas VCs generally just take a small stake (say 10-20% of the company at a time). PE firms also use leverage (debt) in their deals - think of it as how you take on mortgage to buy real estate, PE firms take on debt to buy companies. The PE firm then tries to make improvements to the way the company is operated, increase its growth rate and margins, and then try to flip the company to another buyer in 3-5 years (just like how real estate investors flip houses). Similar to VC firms, PE funds make money off of a management fee (2% of fund size) and a cut of the profits (20%). So the bigger the fund, the higher the pay. The hours can vary greatly depending on which PE fund you work at and what their culture is. It also fluctuates greatly depending on if you're on a live deal or not. Both PE and VC firms will work closely with their portfolio companies to help improve the company's prospects as much as possible. As a MBA trying to break into PE, it would be highly helpful if you had PE experience prior to your MBA because there are very few positions available. There are many pre-MBA PE associates who go to business school with the intention of going back to PE afterwards, so those are the guys who will get first dibs and those are the guys who you'll be competing with.

In general I would say your best option out of the 4 after weighing everything, would be investment banking. VC and PE can be harder to break into if you don't have the relevant work experience prior to your MBA. Investment banking is easier to break into because most people who try to break in from business schools are also career switchers just like you. I've rarely seen people do investment banking as a pre-MBA analyst, then go to business school, only to go back to investment banking as an associate. This is because if they wanted to become an associate, they could just get promoted directly without going back to bschool first. So you won't really be disadvantaged at all.

The most important thing for breaking into investment banking from bschool is to start as early as possible, because you need to accumulate the relevant experiences on your resume. This would include taking relevant finance courses and doing ibanking case competitions in bschool, and most importantly some relevant finance internships if possible. Here's a good writeup on what you need to break into banking:

https://wallstmastermind.com/what-you-ne ... t-banking/

Wall Street Mastermind also has a Facebook group that is useful for those who are interested in pursuing investment banking. They post useful recruiting and interviewing tips in there, as well as industry news so you can stay up to date. You can also ask any questions you have and they're pretty good about answering:

https://www.facebook.com/groups/wallstreetmastermind/

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