Calling all students and young professionals interested in finance! There are so many great career opportunities in finance—from investment banking and auditing, to hedge funds and capital firms. Today, let’s dive into two exciting and lucrative possibilities within the banking and investment industries: private equity (PE) and venture capital (VC). We’re digging into the similarities and differences between the two—and sharing information to keep in mind if you’re interested in pursuing a career in these fields.

Covering similarities will be quick. Both small and large private businesses seek investment funds and expert guidance in the form of private equity and venture capital. PE and VC firms invest in companies based on certain criteria (which we’ll dig into next!) in exchange for equity and partial ownership of these businesses, and potential returns after a sale or big business success.

Differences between Private Equity & Venture Capital: 

Beyond the similar goals of each type of investment—funds that help businesses improve their processes, output, and value—there are many important differences between the two that might influence your job search. Primarily, what differentiates PE from VC is the size of the investments and the type of businesses into which the funds are funneled. 

More about Private Equity

In private equity, a group of investors makes a direct investment in a mature, established company that may be struggling due to poor leadership or ineffective business processes. These investments are large—typically ranging from $10M to $1B—and designed to be less risky because the businesses are more established. The large investment amounts give PE investors a majority stake in the business, which comes with decision-making power around leadership, strategic maneuvers, and sale. The ultimate goal is to use the investment funds and expertise of the investors themselves to get the company back on its feet and sold at a higher valuation, so there is a return on investment (ROI) for investors. 

Your Path to Private Equity

Students interested in pursuing PE should want to learn what makes businesses tick. Practice investigating established businesses, understanding if their foundations are strong (or weak), and thinking through the changes that could make them soar. Typically, people with traditional banking and investment experience are drawn to and hired into private equity work. We encourage having a strong interest in traditional banking here, as the transferable skills will make you a very valuable employee. A career in PE involves long hours, intensive problem-solving, technical analysis, and expertise with tech tools.

It’s important to spend time, even years, building experience in the relevant fields before pursuing work in PE, whether that is investment banking, asset management, consulting, or other traditional finance work. This experience will be your most important asset as you pursue this work and will prepare you for a long and intensive application process.

Hiring for this work typically takes three to six months—and can sometimes take over a year. The reward is high, however—you’ll join a small but mighty industry of people impacting businesses. And, you will be compensated well. Management fees at PE firms run up to 2% on investment amounts, and when totals are as high as $1B … you do the math.

There are relatively few job openings within PE, so it is important to do your research, pursue this work passionately, and be personable and memorable. Start getting to know the top private equity employers (Apollo Global Management LLC, Blackstone Group LP, Carlyle Group, and Ardian, to name a few). If recruiters come to your campus, make sure to attend their events. Become familiar with their investments and sales in order to make an impression. 

Understanding Venture Capital

Venture capital is a form of private equity. VC investors also choose businesses to nurture but intentionally invest in businesses in a start-up phase. These businesses have huge potential for growth. They are also much riskier than the companies PE firms invest in.

When investors see the long-term growth potential of new businesses, they can choose to funnel as much as $100M – $10B into these businesses to spur that growth. This funding, alongside expertise and connections from investors themselves, can be crucial for establishing a business. VC investors are betting on all of these factors to create success and see ROI.

If you think finding a business diamond in the rough that needs a bit of polishing and a great launch pad sounds great, VC might be for you! These types of investments are all about playing the long game and helping businesses reach new heights. VC investors have a minority stake, so there is not as much decision-making power as with PE, but investors still provide important value to these companies.

VC tends to attract people with a wide range of experience, from consulting, to banking, to entrepreneurship. Generally, roles are more qualitative and involve meetings and networking, and schedules and work environments can be slightly more relaxed. Hiring cycles are less traditional in VC, though they can take just as long as PE. Some top headhunting groups include SPMB, Glocap, Kreuzberger, Pinnacle, and Phoenix Group International.

Similarly to PE, passion for the work and relevant experience are critical. Make sure you’re building experience and skills across roles, including VC internships, work in private equity, asset management, startups, and more. Working in finance is important, but it may be easier to find a niche with less traditional experience.

Consider a course or advanced degree to hone your skills. Working in startups themselves can allow you to see innovative VC processes and connect directly with experienced VC investors, as well as expose you to the necessary skills for the work: problem-solving, the ability to thrive in a fast-paced environment, and strong relationships across industries. Even if connecting within a workplace isn’t possible, see if you can attend events and connect with contacts on LinkedIn. Finally, get to know the top venture capital employers, including Accel, Andreessen Horowitz, Benchmark, Founders Fund, and IVP. 

We hope this blog helps you imagine a career in private equity or venture capital! These fields can be hard to break into, but with interest, knowledge, and passion, it’s possible for you to carve your path in this industry. This type of career should definitely be a long-term goal, and like for any career, it’s important to take it step-by-step. Thanks for taking step one with us at Base 11!