How to start your career in Private Equity / Venture Capital

This year will continue to see the majority of Private Equity and Venture Capital funds in India (both global and domestic) hiring pre-MBA candidates for their 2-3 year tenured Analyst/Associate program every year.

Important skills for a financial career in private equity

Private equity (PE), one of the many ways that a company can secure financing, can be an exciting and lucrative industry to join for any finance or business professional. As a career choice, moving into PE offers high-growth opportunities, the chance to work with innovative people and companies and many rewards for a job well done.

Here are some things that professionals already working within finance or investments, or recent undergraduates should know about PE, including what private equity is, what skills professionals need to succeed and what types of jobs to expect for those first starting out.

What is private equity?

Private equity is a type of investment capital that is privately owned.  Investors usually seek out private companies - those that are not publicly listed or traded. PE can also involve buying companies that are publicly listed, turning them private in order to restructure and returning to the market for a profit. PE investments come from equity firms, investment funds, high-net-worth individuals and other institutional investors.

Finding your career within Private Equity

A career in private equity has high potential for growth, and is an ideal career path for any pre-MBA graduate. Professionals who wish to pursue a career in PE should focus on joining a private equity firm as  PE Analyst or Associate, and working his or her way up. Experience in investment banking/consulting is a major plus for these highly competitive roles within private equity, along with possessing these other soft skills:

• Negotiation skills - for making deals between investors, business owners and executives. It will be necessary to convince various stakeholders of the value your firm can bring, and to negotiate the details in large and small deals.
   
• Relationship building skills - a large part of working in PE is about networking and building up a trusted network of clients and other contacts.
   
• Technical financial skills - These are necessary to create and analyse the details of deals with clients and companies.
   
• Management skills - As you progress in your career, being able to manage others, including external stakeholders will become essential for success.

There are many complex strategies used by private equity firms to make investments, including leveraged buyout, and using growth capital, mezzanine capital and venture capital (VC). Of the three, venture capital is another major area of growth and an interesting specialised career path for finance professionals.

What is Venture Capital?

Venture Capital is a type of private equity for startups and small to medium size businesses that have high-growth potential, or have already achieved high levels of growth in the initial stages of operation. When venture capital firms invest in these companies, they exchange funds for equity or ownership in the company, with the hopes that companies they support will continue to grow and turn profitable.

Venture capital funding starts with a seed funding round, then moves through additional rounds from Series A, all the way until an initial public offering (IPO), or merger, acquisition or other sale of the company occurs.

A career in venture capital

Choosing to pursue a career in venture capital is a fast-moving, exciting career choice. It’s a quickly-changing market and while the risks are higher here than in most other investment areas, the rewards are also more exciting.

Many professionals start their career in venture capital as a VC Analyst or Associate and then, depending on the investments they are able to make and the relationships they form, can move up in the ranks at any venture capital firm.

There are several essential skills that professionals looking at a career in venture capital should look to cultivate, besides general investment experience and extensive investment knowledge.

• Negotiation skills - these will be essential when doing business with startups and other small businesses to negotiate the terms of the investment.
   
• Deal making skills - along with negotiation skills, being able to secure the best deal for your company will make you an asset.
   
• Networking expert - part of being successful within VC is dependent on your network and your reputation within the industry. A highly valued skill is being able to connect people and to create and maintain a vast network of contacts.
   
• Long-term vision - being able to see the long-term potential in a company is a highly-valued skill  and even better if you are able to see the roadmap to help companies reach that potential.

Exit Options Post Pre-MBA investing roles in India

• Business Head/Product/Operational Roles
  As a result of increased on ground understanding of businesses coupled with deep know how of tech, many candidates move into these roles with leading start-ups.
   
• Own start-ups/ founding team member roles
  Exposure to operational aspects of business, fund raising, M&A, industry/sector landscape, networking etc become key enablers to start your own venture or join one.
   
• Strategy/M&A roles in Industry
  Fund raising, M&A, Strategy implementation experience is very sought after for such roles and becomes a natural exit option for candidates in this pool.
   
• Continue in investing
  Nowadays increasing number of candidates prefer to continue their careers in investing (over applying to B-Schools) by applying for permanent roles with other buy side firms who don’t have MBA prerequisite.