Getting In To Private Equity Without An MBA

 

For most of us, it's hard to get a glimpse inside the ivory towers of private equity (PE), a world of sharp-suited deal-makers and financiers. The sector has a reputation for being a 'closed-shop', one that intentionally keeps headcount low and hires only from an exclusive set of business schools and strategy consultancies.

 

So it was with a tinge of excitement that we met Mr C (anonymised because he’s a low-key sort of guy), a Vice President at General Atlantic, a top-10 global investment firm with a mere $17 billion of assets under management.

 

Mr C, who recently became a dad for the first time, has a calm and considered manner with an incisive mind. His CV is mouth-watering: an engineering graduate from the UK's University of Cambridge, Mr C trained at Boston Consulting Group (BCG) before taking his first role in private equity at Warburg Pincus in 2007 and then moving to General Atlantic last year.

General Atlantic invests in pre-IPO private companies - a total of 200 in the last three decades - including none other than Facebook. Teams within the firm specialise loosely in sectors (e.g. technology or healthcare)

and then pursue a 'deal-flow' of target businesses.

 

According to Mr C, 'alpha' (added value) in private equity depends on providing "differentiated deal-sourcing" - in less cryptic terms this means finding better investment opportunities than your competitors.

Of the two firms he's worked in, Mr C says "Warburg and General Atlantic have common features: both are focused on long-term-growth with a similar investment size and profile and a global portfolio".

For many MBAs this is exactly the problem - it's hard to differentiate between the private equity players because they all sound the same from the outside. Mr C agrees: "It's true many PE firms are opaque, although hedge funds can be worse..."

 

If you're hoping to break into private equity or venture capital, it's important to do research and understand any major operational or cultural differences between firms. Mr C comments: "Some of the private equity houses are run more like banks with a lot of hierarchy and face-time whilst others are more pragmatic. The best way to understand the different players is to speak to people in the market and try to get first-hand feedback".

 

So what are Mr C's thoughts on getting into private equity without an MBA? On the one hand he thinks in the US "it's the default route to do an MBA". On the other hand, none of the 20 or so people in General Atlantic's London office have an MBA.

 

Mr C 's view is that a (full-time) MBA provides three things: one, educational content; two, a network and three, time to think. In contrast, an executive (part-time) MBA might still provide content but doesn't deliver points two or three - a weaker network and no time to think!  Nevertheless, Mr C sacrificed any 'thinking time' and opted for a part-time finance course - the intensive MFin at London Business School (LBS), which he studied at the weekends.

 

Having never really considered going to business school in the UK, Mr C says that he found the network and classes "surprisingly useful" at LBS and commented that if you go to a West Coast US business school like Stanford only 30 or so of your classmates are likely to end up back in Europe, so your local professional network could be quite weak.

The Masters course was divided between the core investment and corporate finance modules and electives such as economics and strategy that were integrated with the MBAs.

 

Overall, Mr C says he's "very happy" with his choice of a part-time MFin, particularly because he didn't have to take the two-year career break that an American MBA entails.

He's conscious that many of the senior people in his industry (particularly in the US) have notched up an MBA along the way and says it took 'balls' to decide not to do one. But he's also aware that MBAs typically enter private equity at a lower level than his current job, so it wouldn't have made sense for him to take the time out of his career at this stage.

 

So what does Mr C highlight as the single biggest skill needed in private equity? You might think 'analytical' or 'modelling' skills, but his answer was 'people'. Whether hiring investment associates within the firm or recruiting executives for portfolio companies, old-fashioned people skills are an important asset. Mr C also emphasises the need for a cool head, saying that it's easy to succumb to 'deal heat' and to 'make the model' work because you emotionally want to buy a company, even if the figures don't quite add up.

 

Before Mr C embarked on his stellar career, and in fact before he'd even set foot at university, he was exposed to the world of commerce through his family business: a tile warehouse set up by his Mum and Dad in Stratford (Shakespeare country!) in the UK.

 

What started as a home decoration project turned into a fledgling business when his parents ordered too many tiles for their bathroom and wanted to sell the excess. Mr C got involved as a teenager and ended up helping to run the company, as a sideshow to his studies and early career.

 

Mr C showed early signs of a commercial mind by sourcing tiles from China, managing stock control and setting-up an eCommerce platform for the business. No doubt all useful core business skills now that he sits on the boards of numerous General Atlantic portfolio companies.