If you are interested in building a career in private equity, there are numerous aspects to consider both before and during the job. Private equity is a fascinating and challenging field that can be incredibly rewarding for those who are willing to put in the time and effort to succeed. Below are a few of my big tips on how to plan and execute the formation of a successful private equity career.
First of all, it’s important to understand what private equity is and how it works. Private equity is a type of investment that involves buying and selling companies or assets that are not publicly traded. Private equity firms use money from investors to buy these companies or assets and then work to improve them before selling them for a profit. This is a huge simplification, and oftentimes, deals come with intricacies, partnerships, and operational initiatives that the firms use to execute their underwriting strategy. My first tip for building a career in private equity is to understand the different kinds of firms, understand what kind of firm you’d like to work for, and find the team that best suits you. Once these are perfected, you have laid the foundations for a good career. Strategy and the team you work with to achieve strategic goals are very important and they can often make or break your career, so this is certainly a step not to be overlooked.
One way to get started in private equity is to pursue a degree in finance, accounting, or a related field. A degree in one of these fields can provide you with the foundational knowledge you need to succeed in private equity. You may also want to consider pursuing an MBA, as many private equity firms prefer candidates with an MBA. One thing to note here is that your educational background can give you a huge leg up in the long run when it comes to a career in private equity. If you go to a traditional school, where many kids do banking and eventually move to private equity, you have a unique opportunity to develop a network of peers who may well be your private equity counterparts in the future. These connections may often be the start of a new deal sourcing process or partnership. You’ll learn quickly that private equity is all about relationships and your ability to leverage your previous connections to source deals that will generate returns for the firm is paramount to your longevity in the industry. It may seem petty or “try-hard” to think of your college and MBA years like this, but I assure you that the people who are going to make a career out of private equity are thinking like this, so naturally you should give it some thought too.
As mentioned, networking is key in the private equity industry. You’ll want to build relationships with people who work in private equity, as well as those who work in related fields like investment banking and consulting. A large part of your role, as you get more senior, is to attend industry events and conferences, join professional organizations, and use social media to connect with other professionals in the industry. You will start to learn that any leverage you can rely on to source a deal or get access to an exclusive opportunity is something you want to rely on and should not be overlooked. Some of the most successful people in the industry are the ones who can execute a deal while also making it happen in the first place. Everyone has a network but what differentiates those that are successful is their willingness to maximize the network they have—and you should too if you want to stay in private equity.
Once you land a job in private equity, it’s important to work hard and be dedicated to your career. Private equity can be a demanding field, and you may be required to work long hours and take on a lot of responsibility. However, if you’re willing to put in the effort, the rewards can be significant. It is easy to read forums and get excited about the high levels of compensation that private equity professionals get paid. Nevertheless, it is equally important to realize that compensation does not mean anything if you cannot express to the firm you are working for that you can continually contribute meaningful value to the fund’s operations. Beyond the associate role, you need to start producing results for the firm, as most shops don’t keep their associate classes. Those that are kept are often the ones who play up in their roles and start to take responsibility and dedication to the job to the next level. At the end of the day, it is not too hard to differentiate because as we get older, people tend to get jaded; they want to start having more of a social life, they have more responsibilities, and they have more distractions. If you can manage your life and your distractions and still perform at a high level, you have a much better shot of beating these folks out in the long term. This is a job that requires long-term sacrifice. If you want to truly reap the rewards that private equity has to offer, you need to put in the work that other folks can’t be bothered to do. Ultimately, whoever brings money in is who gets to stay; it is best to start thinking in this mindset as early as possible.
As you gain experience in private equity, you may want to consider specializing in a particular area. For example, you may want to focus on a specific industry, such as healthcare or technology, or a specific type of investment, such as distressed assets or growth equity. Specializing can help you build your expertise and allow you to become a differentiated asset to your team, granted you are performing well and delivering results.
Finally, it’s important to stay up-to-date with trends and developments in the industry. Private equity is a constantly evolving field, and staying current can help you make informed decisions and stay ahead of the competition. Read industry publications, attend conferences and events, and stay in touch with other professionals in the industry to stay on top of the latest trends and developments. Having a long career in private equity requires dedication and the ability to push yourself, but it is also incredibly rewarding both financially and intellectually and one I highly recommend others embark on.
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