Getting Into The Private Equity Industry As An MBA
Private equity is the holy grail of industries for many MBAs. Getting into the industry requires some luck sometimes. Jounathan Moules, a writer for Financial Times, recently discussed how MBAs can break into venture capital (VC).
“Unlike equally lucrative careers in banking and consulting, an investor is intimately involved in the success of companies, which by dint of raising funds are bullish about their prospects,” Moules says. “A VC partner will take a seat on the board of portfolio companies. They also need good people skills as the job often involves being a mentor to founders and their teams.”
Private equity investing, which includes VC, may be a tough nut to crack, but, that hasn’t stopped MBAs from trying. According to recruitment data by Harvard Business School, private equity was the second highest employer of MBA graduates from HBS. 18% of its 2017 Class went into it, 10% more than the Class of 2013.
Jonathan Shepherd is corporate relations director in the careers and professional development team at HBS. Shepherd tells Financial Times that the increased interest in the private industry is a reflection of more students joining start-ups as a learning strategy before looking for VC jobs
“It helps to learn about what it takes to succeed, and then use that experience,” he says.
Few Are Hired Straight From Graduation
Unlike investment banks, VC firms don’t actively recruit business students on campus. Instead, students are expected to have work experience under their belt if they intend on breaking into the industry and advancing up the ranks.
David O’Toole is head of the technology and professional services executive search team at Harvey Nash — a global recruitment consultancy. O’Toole tells Financial Times that start-up work experience is crucial to getting into venture capital.
“It is not easy at all for outsiders to get hired,” O’Toole says. “The VC sector has a culture built on trust. So, the best thing to do is to build a record of working in start-ups.”
For those who do get hired straight from business school, it isn’t easy. Without experience, MBA grads are likely to start at the bottom of the ladder, according to Martin Mignot, a partner at Index Ventures — a venture capital firm based in Europe and San Francisco. “It is very much an apprenticeship model,” he tells Financial Times.
Proximity to a school near the VC industry matters, but not as much as when compared to other industries. The University of California—Berkeley Haas School of Business is located just across the bay from San Francisco. Yet, according to Financial Times, only one of two of the hundreds of MBA grads from Berkeley’s Haas School of Business get hired by VC firms.
Abby Scott is assistant dean for MBA career management at Haas. Scott tells Financial Times that graduates tend to join the VC sector several years after graduation once they’ve gained relevant start-up experience.
For some, however, studying near the industry does pay off. Cambridge Judge MBA graduate Carol Cheung became an investment associate at Cambridge Innovation Capital after working for start-ups around the city. She is an advisor for four of the 22 companies that her company has invested in.
Cheung tells Financial Times that experience taught her how to identify start-ups with successful potential and start-ups with little potential.
“It is hard to find that diamond in the rough, but it can be even harder living with the decision not to back a company that went on to succeed,” she says.