“I want to go into private equity’” … ding, ding, ding…drink!
Remember that old drinking game from college when you were say, watching Survivor, and Jeff Probst would say, “Here we go” and then everyone would take a shot? That’s how I sometimes feel when applicants tell me about their desire to get a job in “private equity” or “venture capital.”
Believe me – if I had to take a drink every time those words were uttered, I would be one drunk guy.
Of course, the reality is that most applicants who say they want to go into “PE” or “VC” have only a superficial understanding of what it is. In fact, for many it is short-hand for “I want to make a lot of money.”
Here’s a quick – and overly general – tutorial on “private equity.”
Private equity (PE) is an investment made into a company that has only a limited number of shareholders and about which information is not public. Generally, private equity includes a level of investment whereby the investors essentially take control of — or have great influence in — the operations of a company.
Once a private equity investor places their money into a company, they have little control over when they can recoup their investment; they are locked in for a while.
This is very different from “public equities” – your average stocks – in which anyone can invest. Information is open to scrutiny by essentially anyone, and the investment itself is very liquid, meaning you can get your money out at any time (by selling your shares).
There are many different types of private equity, and this is where the average applicant falls down.
Saying you want to go into private equity is like saying you play sports – do you mean golf or tennis? Are you a professional or an amateur? Did you play it now or did you play it as a kid? If you say you want to go into “private equity” to me this implies you don’t really know what you are talking about.
Needless to say, if MBA admissions committee recognizes that you really don’t know what you are talking about you could get a fast pass to the ding pile. A credible applicant who says they want to go into private equity should be prepared to answer the question of what type. To help you with that my next blog post is on the flavors of private equity.
One thing to remember is that private equity is not the golden ticket most aspiring MBA candidates think it is. Certain types of private equity can be real money (or salary) losers.
It is challenging to get a job in private equity, even if you graduate from a top ranked MBA program. Don’t be fooled by the employment numbers. Most people who go into PE or VC after they get their MBA probably worked in PE or VC before business school.