What made you want to enter this career?
I have had an interest in the investment business since college. I was at the right place at the right time a few times and was able to work at top-tier firms early in my career. I studied economics in college at Harvard and worked at Morgan Stanley after college. After I finished my two-year banking program, a number of private equity firms had just begun hiring from these programs. I was fortunate to get a job at Hellman & Friedman, which allowed me to do two great things: live in San Francisco and work in private equity. I got a terrific education in investing at Hellman & Friedman—that’s the foundation that I carry with me still. Silver Lake formed in 1999, and getting a job there let me get into the technology sector and pursue my love of investing.
Tell us about your firm. What have been the rewards and challenges of founding a private equity firm?
I started Luminate Capital to build a firm focused entirely on what I have been doing for a number of years at Silver Lake: investing in the software business with a partnership and value-added approach. Being good in this business, whether at a large or small firm, requires an entrepreneurial spirit. Working on deals and with companies has not been so different at Luminate than at larger firms. Establishing the firm and the brand and overseeing the administrative aspects of the business are harder.
What are the most important personal and professional qualities for people in your career?
This is fundamentally a people business. There is an analytical foundation to it that is crucial. But each transaction requires bringing together a large number of people to work on a joint project, and each partnership with a portfolio company is based on a close relationship with the management team.
What advice would you give to job seekers in terms of applying to and interviewing for jobs in the private equity industry? What’s the best way to break into the industry?
Historically the best way to get into the industry is to get training as an analyst at an investment bank or, increasingly, at a private equity firm equipped to train young people. This remains the best approach. These programs supply a terrific analytical foundation and teach the analysts the fundamentals of investing.
What have been some of the most-rewarding experiences during your career, and why?
The most rewarding parts of my career have involved having the opportunity to meet and work with tremendous management teams and entrepreneurs to learn about their businesses and help them build them. I am constantly amazed by the extreme talent in the technology sector and the energy and passion that executives invest in their businesses. It has been a true thrill and honor to work with them.
How will the field of private equity change in the next five to 10 years?
I believe the industry will continue to get more specialized. When I joined Hellman & Friedman, a handful of top-tier firms gathered the majority of industry assets and most had a generalized focus. Silver Lake started in 1999 with a specific industry focus on technology. Now I am starting Luminate with an even more specialized focus on software. I believe that this specialization helps a firm focus, build a brand, drive a team toward a differentiated mission, and be the best partner to management teams in an industry.
BellCast Partners (http://www.bellcastpartners.com) is a boutique recruiting firm in New York City.
Please tell us about your firm.
BellCast Partners is a boutique recruiting firm focused exclusively on placing investment professionals in the private equity industry (we also do a small number of select searches in banking, hedge funds, corporate development, investor relations, etc.). We work on analyst- to partner-level searches. Our clients have ranged from first-time funds to mega funds, and our candidate placements have spanned a wide range of sectors including financial services, energy, consumer/retail, technology, media, real estate, healthcare, etc. Our capabilities are global, and while we conduct searches in Asia, India, Latin America, and Europe, our primary business is in the United States where the private equity industry is the most established. We partner with our clients to help them identify and hire highly talented professionals. We know that cultural fit is often as important as investment acumen and we strive to truly understand both our clients and candidates to make the best possible match.
What are some of the most-popular jobs in the industry? What are the common personal and professional traits shared by those who are hired?
While large cap funds will likely always hold appeal with candidates for their newsworthy deal activity, brand name experience/training, and outsized compensation packages, there has been a recent trend towards middle market and newly formed private equity funds. Many candidates value the promise of increased responsibility and hands-on experience with portfolio companies as well as a potentially faster/clearer path to partnership at a smaller/newer or middle market fund. Tenured candidates are usually quite focused on the likelihood and timeframe for making partner. A fund’s growth trajectory, the current number of partners, and the number of investment professionals ahead of an incoming hire in the organization are all data points that candidates consider when assessing the path to partner at a given fund.
Middle market private equity funds often focus on hiring candidates with similar size deal experience. At the junior level, many funds want to recruit from the middle market banks and, at the senior level, they want to recruit from like-sized/like-minded firms. This has shifted from how firms recruited in the past. Previously, middle market funds wanted to recruit top talent from the large cap funds as a way of building credibility within the limited partner community. Now, it can be challenging to move downstream from a large fund. Middle market funds are often leaner and employees may have to juggle a lot of different roles within the organization. Some middle market firms are concerned that someone coming from a larger institution with more resources and employees will not acclimate to the role as well as someone coming from a more comparable size firm. Most middle market funds put an emphasis on candidates being well-rounded rather than having top tier academics and pedigree. They want people who are relatable to management teams and have the skills to be successful at sourcing investments in the future.
Large cap private equity funds often focus on hiring candidates with top-tier academics and work experience. Many funds will request candidates’ SAT/ACT scores and GPAs with minimum cut-offs that can be highly competitive. Candidates who have attended less-prestigious or lesser-known colleges are generally expected to have a higher GPA than someone who went to an Ivy League school.
What advice would you give to job seekers regarding applying to and interviewing for jobs in the PE industry?
Candidates should reflect on the type of experience they want and what they value. They need to understand what their skills are and what they enjoy most/least about their current job. There are lots of private equity funds, and roles within these funds can vary widely. If a candidate likes talking to people and building relationships, they should focus on opportunities that encourage employees to source new transactions. If a candidate desires a more entrepreneurial opportunity, then they could explore a first time fund. It is important to really do the research to understand what makes each fund unique. Candidates should be prepared to articulate why a fund is a good fit both in culture and investing style. Finally, firms are looking for team players who display a balance between humility and confidence.
What’s the interview process like in the PE industry?
Each private equity fund has its own process. Some firms will run a one- or two-day process where the candidate will meet a subset of the employees; other funds will have multiple rounds of interviews in which the candidate will meet the entire team. Generally, the more senior the role, the more interview rounds a firm will have and the longer the process will last. The most basic processes will be “fit” oriented and will mostly consist of a Q&A about a candidate’s background and work experience. As interviewers may go into detail on any deals that the candidate has worked on, the candidate should know the numbers around those transactions/businesses cold. Some interviewers will ask candidates to complete a paper LBO or, if the firm has a lot of ex-consultants, they might ask candidates to walk through a case study. The Vault Guides are a helpful way to prepare for case interviews! Many funds will administer modeling tests for their most junior candidates and sometimes for recent MBA graduates, which can vary in length and format. Lastly, some firms may require a personality assessment. These are less common, particularly at the junior levels, but can generally be completed online outside of business hours. There is no way to prepare for these; candidates are either a fit or not based on the results.
What’s the employment outlook in the PE industry? How will the field change in the next 5–10 years?
I wish I had a crystal ball! There has been a lot of change over the past 5–10 years. We have seen hedge funds and tech start-ups draw away some of the talent that was otherwise entering private equity. We have seen the fall of Lehman, Merrill Lynch, and Bear Stearns in 2008 and a lot of investment funds close up shop or enter into wind-down mode. Some funds spawned new funds or got a second life after focusing on harvesting their portfolios. One thing that has remained true is that the industry is resilient.
Recruiting activity in 2015 is back to a similar level as what it was during the most recent peak (2007). Many new funds have sprung up over the last few years and we expect more of that activity provided the economy remains healthy. We have seen limited partners bypass general partners altogether and build out their own direct investing teams. Limited partners have also shown an increased appetite to co-invest as a way to average their fees down. The start-up bug has bitten the younger generation of private equity professionals who want to leave institutional investment platforms to look for deals on a more flexible basis. Many mid-level professionals are feeling discouraged about their own path to partnership and are finding pockets of money that can fund them on a one-off deal basis. Some of these will flourish and, of course, others will not. These new funds are hiring at all levels and that has created employment opportunities.
We are currently seeing robust hiring activity at every type of fund. The activity/growth in the industry is positive and as new funds hire, that leaves vacant seats at other funds that need to be filled. It is a giant game of musical chairs, but for the moment, chairs are being added rather than taken away.
Tell us a little about yourself. What made you want to enter this career?
I grew up in a small town about 60 miles from Chicago, graduated with Bronze Tablet honors with a B.S. in Finance from the University of Illinois, and have been married for almost 12 years to a wonderful stay-at-home dad to our two young children (2½ year-old daughter and a 10-month-old son). My parents were both in the medical field, so I was the oddball. I always knew I wanted to go into “business” but wasn’t quite sure what that meant until I was a junior in undergrad and learned of investment banking and private equity from a finance class I was taking. Back then U of I didn’t have any courses specific to these industries, and the big I-banks didn’t come to recruit at the school. We had to take the initiative to find the analyst spots ourselves for the most part. Once I knew what M&A was, I was determined to start my career path toward private equity and at the time, that meant doing the two to three years in I-banking first to get the baseline skillset for private equity. I loved the idea of learning about new industries and new businesses, and meeting the founders/CEOs of these companies. One of the most rewarding things about private equity is the fact that you don’t do the same thing day after day—I get excited by the challenge of convincing founders to sell their business to me, convincing investors to invest with my team, and taking small businesses to the next level of success via expanding teams and creating jobs, building new products and solutions, and improving operations to make each dollar of revenue more profitable.
Tell us about your firm. What have been the rewards and challenges of founding a private equity firm?
ParkerGale Capital is a $200 million buyout fund focused on the tech-enabled services sector only. Over the last several years of working together, we have created a repeatable model to source, acquire, and improve founder-owned companies. The rewards of founding a PE firm are many—being able to start from scratch with close partners and friends to create our own unique culture of transparency and mutual respect has been key. I think historically PE firms haven’t necessarily been the best at managing their own internal team dynamic, and we made it a point to set the tone and environment from day one to be one where we all have an equal voice at the table and can feel comfortable with challenging one another but in a respectful manner. In order to make the best decisions on new investments, we believe we all need the full data set so we are in constant communication with each other on every deal. This same culture of transparency applies to our relationships with our investors and the management teams we back in our investments as well. We are all aligned with the same goals. Not surprisingly, a challenge to founding your own PE firm is the fundraising process and making sure you have access to the right limited partners to get the fund raised. Even if the team has worked together for several years at a different firm, the new firm is considered a first-time fund so you have to get out there, open as many doors as possible, and tell your story.
What are the most important personal and professional qualities for people in your career?
I believe the most important personal qualities for someone in PE are being outgoing, personable, energetic, and confident, yet self-aware, at the same time. We have to “sell” people all the time—whether it be to a business founder who we are trying to convince to sell to us versus one of 20 other PE firms or to a limited partner as to why they should invest with us versus a competitor. You can’t be successful in these situations if you don’t connect with people and have fun networking all the time. You have to differentiate yourself from hundreds of others just like you—to deal with intermediaries, founders, executives, investors, etc. If you don’t like networking events, dinners, conferences, etc., where you have to get out of your comfort zone to meet new people and forge long-term relationships, then PE probably isn’t for you. I say self-aware too because I think sometimes in our industry people think they are the smartest in the room, and sometimes that’s just not the case!
I believe the most important professional qualities are hard-working, ethical, analytical, and organized. It’s no secret that PE isn’t a 40-hour work week, so you have to be willing to work hard including nights and weekends and, of course, lots of travel for board meetings, for fundraising, and for new deal sourcing, too. If that doesn’t sound fun, PE won’t be a good fit. Ethical is a no-brainer in my opinion. This is a small industry, and reputations precede us. You need to treat people fairly as you want to be treated, and always do the right thing. There’s no room for error on that one. Analytical and organized are pretty straightforward traits; there’s a lot of modeling and due diligence that needs to be done on target industries and businesses, and we often sit on several board of directors at any one time so you have to be organized enough to manage all the portfolio companies you are responsible for, while still effectively deal sourcing, and perhaps even fundraising all at the same time.
What advice would you give to job seekers in terms of applying to and interviewing for jobs in the private equity industry? What’s the best way to break into the industry?
I think the best way to break into the industry is still doing the two- to three-year analyst stint at an investment bank and then trying to get a pre-MBA spot at a PE firm. Our industry is a meritocracy, so if you get in the door and show your strengths and demonstrate that you are a valuable member of the team, you may have a shot at getting a spot long-term post-MBA, etc.
Alternatively, I think getting a job at a PE-owned business and getting the interaction with the PE folks that way is another good way of trying to work your way into the industry. Again, if you can show the PE firm that you have a unique skill set that adds and creates value, you have a better chance of breaking in than someone who hasn’t had any interaction or experience with PE and how it works.
In terms of advice to job seekers, I would say try to get interviews at as many PE firms as you can. If nothing else, it will give you the experience in how the interview process works. I’d say to make sure you know why you want to get into PE in the first place, and don’t use a “canned” answer from some online blog. Be real. Be prepared to walk through how you would look at a potential investment because we want to know how you think.
What have some of your most-rewarding experiences during your career, and why?
In general, one of the most rewarding aspects of my career is being a part of transforming companies from small, founder-owned businesses to high-growth, scalable enterprises and watching the teams grow over three to seven years under our ownership. Partnering with founders to help bring more than just financial resources to the table is pretty exciting, and I’ve created life-long friendships with the founders and executives I’ve partnered with over the years. I’d have to say that starting my own PE firm with my partners has also been the most exciting part of my 14-year journey so far.
Any special advice for women considering a career in PE?
I wouldn’t give women different advice than men necessarily because I think the attributes and qualities that will ultimately lead to success in this industry are the same regardless of gender. Having said that, I would say that women should absolutely seriously consider a career in PE and hopefully not get scared away because of the lack of women in the industry currently. I think it’s an excellent career with so many opportunities and wouldn’t change a thing even if I had the chance to start over. If you want to be a part of it and believe it’s a good fit for you, my advice is to go out and make it happen because you, as a woman, have a unique perspective to bring to the table when evaluating a new investment, working with management teams, etc.