How do you get into private equity with a non-traditional background?

I was faced with the same question several years ago (2014, actually).

Here's how I navigated it...

What's a traditional background for private equity?

Start with, what is "traditional" actually?

Normally, you would come out of undergrad (college) and spend a couple years at a "bulge bracket" investment bank.

It's funny, "bulge bracket" is a term I (and many others) have thrown around, but what's the actual definition?

Here's what I found on Investopedia:

"Bulge bracket is a catchall term for the most profitable multi-national investment banks in the world, whose banking clients are normally large institutions, corporations, and governments."

10 more seconds of google research revealed there is no "official list."

Anyway, "bulge bracket" is the big banks, mega banks, companies like: Bank of America Merrill Lynch, Goldman Sachs, Barclays Capital, Credit Suisse, Deutsche Bank, JPMorgan Chase, Citigroup, Morgan Stanley, and UBS.

Make sense?

So, you spend a couple of years there, and then "recruiting cycles" kick in to hire "pre-MBA Associates" or Analysts into the larger private equity firms.

Then, you might spend a couple years at one of the larger PE firms (usually 2 years), leave to get your MBA, and then potentially come back, or find work elsewhere.

The "most traditional" route would be for that "post-MBA Associate" to come back to the same firm and eventually become a VP (Vice President).

I have zero stats on how often that scenario plays out but that's the most traditional path:

Undergrad > Banking > Pre-MBA PE > Business School > Post-MBA PE

I had experience in Consulting and Corporate Finance

Okay so to start off, my background was decent at least, just not traditional.

I didn't have my MBA, and I wasn't in recruiting circles or anything like that.

But, I did at least have a core skill set I could leverage.

Great experience at FTI Consulting and then Corporate Finance exposure at Hilton.

But zero investment banking experience.

If anything, my transition from Consulting to Corp Fin probably sent me in the other direction.

I say that because it's common to hear that Management Consulting can be a semi-decent, but not preferred, path to Private Equity as well.

But going from Corporate Finance to PE? I'm sure it happens, but I never really heard about it.

Corp Fin life

I'll never forget that spark moment when private equity caught my eye.

I was looking at some document or another, doesn't matter.

What's important was it was a document from the private equity firm that owned Hilton at the time, Blackstone.

I saw a very young person, only 32 years old, listed as either a Board member, Advisor, or some other "very high up position" and my mind was blown.

I was maybe 28/29 at the time, and to think that someone only a few years older than me held such a prestigious position -- I had to know more.

So I started researching "how to get into private equity..."

The Research Process

After some google searching I was quickly dismayed.

Like I said above -- zero banking experience.

Very limited "deal exposure" in the traditional M&A sense.

I was pretty much starting from scratch.

There was one thing that stood out to me though...

There was this whole world I found called the "middle market" or "lower middle market" by some.

According to the Corporate Finance Institute, the "lower middle market" is:

"Lower middle market refers to the lower end of the economy’s middle market segment, which is measured in terms of the firms’ annual revenue. Firms that are grouped under the lower middle market category realize an annual revenue that ranges from $5 million to $50 million."

Basically just a long way of saying "smaller companies."

In fact, I found it was a very popular segment of the market, and many "mega fund people" had left those jobs to start smaller "middle market" PE shops.

(btw, when I say "shops", I just mean a private equity "firm")

It was popular because the companies were less efficient, meaning there was more opportunity for growth, and you could become very involved with the management team to help them succeed.

In addition, the PE firms were much smaller, often times fewer than 10 people.

And most importantly, sometimes they would be open to people with less traditional experience.

At that point I was in -- I'd always been drawn to a smaller company culture, and the ability to meet directly with senior management members enticed me.

I figured I could learn so much with that type of exposure.

And maybe just maybe I'd have that "prestige" of the young 32 year old I'd seen earlier.

Learning Private Equity on the Internet

Without traditional experience to call on, where do you think I went next?

Google.

Yep, just like I do for everything else.

Start on the internet.

Popular websites. Forums. YouTube (although limited back then).

Eventually I found my way to a special type of financial model called an "LBO Model."

"LBO" stands for "Leveraged Buyout" and basically means putting additional debt and equity into a company in order to purchase it.

That was private equity in a nutshell -- very similar to buying a house.

But I knew to even get myself in the door, I'd need to learn to build one of these "LBO Models."

More research and dead-ends, I finally found my way to an online course.

I really needed direct instruction on how to build one of these things.

It was just too complicated trying to string it together through various online articles (though admittedly I did find a few good ones).

I needed something direct that I knew was correct, that also saved me on opportunity cost.

Which course did I find? Unfortunately I don't exactly remember.

I worked through the course and simultaneously started looking for PE firms to reach out to.

Finding PE Firms

So, I didn't know anyone in PE, didn't know any recruiters.

How would I find these companies?

Same as before.

Google.

It's harder to find PE firms on Google than I'd hoped...

I was looking on Google maps, flipping through forums, looking deep on pages 2, 3, 4 of Google.

SEO for these small firms wasn't a big thing back then -- you either knew the name or didn't.

I was able to cobble together a small list in my target market (Colorado), and then started reaching out one by one.

Cold Calls and Emails

I sorted my list by the firms that looked most attractive and just worked my way down.

I started off with emails, but also made calls, and even sent a hand-written letter.

Believe it or not, I actually found an old email I used, here it is (certain parts redacted):

Dear [name],

My name is Chris Reilly and I would like to work for your firm.  My work experience and personal interests align perfectly with the [company] vision and portfolio.

I've worked with Hilton Worldwide the last two years and played an integral role in [work experience].  I know what the P&L should look like and am familiar with [industry] performance metrics and valuation.

Prior to Hilton, I worked with FTI Consulting in New York City during the peak of the financial crisis.  This was invaluable work experience - I learned to review a company top to bottom, create an excellent work product in a tense environment, and deliver on time.

My financial modeling skills are excellent and I've taught myself to build an LBO model during my spare time.

If you have the time, I would like to fly out and meet you for lunch.  Whether you are hiring or not, it would be a pleasure to learn more about you and your firm.

I will follow up with a phone call in a few days.

Sincerely,
Chris Reilly

So How'd it go?

For the most part... crickets.

No response or a quick "no thanks," that kind of thing.

But I was at least getting through some of the time, reaching real people.

Every so often too I'd get a thoughtful response like, "we're not hiring right now, but I'll connect you with someone you can talk to."

That was really helpful because I started to have a few real conversations with people in the area.

It was truly a "micro-network", but a network nonetheless.

I kept at it for months, until finally I received a response from a firm that was interested.

Funny enough, it was one of the firms I'd looked at first.

Their differentiator?

They actually wanted people with a non-traditional background, because they felt sometimes the traditional background actually created bad habits.

They wanted new perspectives that they could mold.

PERFECT.

That was me.

I knew that was my shot, so I took it.

I returned emails as quickly as possible, took phone calls immediately, and eventually flew out for the interview.

Fast forward a bit and I was lucky enough to receive an offer and get the job.

I'd made it -- private equity.

Lessons for Today

I spent nearly 7 years in PE and became a VP before heading out on my own in 2020.

Looking back a couple clear lessons come to light:

Make sure you really want it

I loved my time in Private Equity, I really did. But, I feel like my initial intentions were all wrong.

Remember that "young 32 year old" I saw?

I was mostly drawn in by the prestige initially.

Sure, I'd read plenty of forums of "what it was like to work in Private Equity," but nothing could really prepare you for the real thing.

It was a ton of work, travel, and much longer hours than I was used to.

Now, I learned a ton along the way, and it was hands-down the most valuable experience of my career.  I wouldn't trade that for anything, but I think my initial drive was misaligned.

You have to hustle

It's probably easy to say, "yeah Chris looks like you just got lucky with that one firm."

And you'd be right, I was.

But it's also because I hustled like no other.

I taught myself LBO models in my spare time, did all my own company research, and continued to contact people until something worked.

So that "luck" never would have kicked in had I not put in the work in the first place.

Now, I won't be so cliche as to just say "hard work pays off" -- it doesn't always.  That's a reality we all have to accept.

But, it definitely helps, and sets you up for the best chances of success.

Yes, you need technical skills, but it's not everything

You've gotta know your technicals. Period.

By that I mean building models, understanding the P&L, Balance Sheet, etc.

That stuff gets you in the door, but it doesn't keep you there.

You need "soft skills" too, with the main one being empathy.

Private Equity firms and Business owners are often at odds with one another -- very common for them to disagree on how to grow the company, etc.

The ability to empathize with both sides and help everyone work towards a solution is critical.

And you've gotta check your ego at the door -- the last thing a business owner needs is another "hot shot PE person" telling them what to do.

Your models give you a strategy and maybe a playbook, but it's truly your people skills at the end of the day that keep you there.

A resource that can help

Remember that course I mentioned earlier?

It was good enough -- I got the job after all.

But, it was far too "illustrative" and "directional."

After several years on the job, I vowed to change that educational experience.

So -- I created my own course.

A course that shows you what it's really like to work in Private Equity.

All the details and expectations, taught through the discipline of a financial model.

If you're interested in sharpening your technical skills (the part that gets you in the door), be sure to check it out -- just click here.

Signing Out

Thanks for reading.

About Me -- If you've never seen my stuff before, I'm Chris -- from skyscraper to Solopreneur -- I help middle market companies with M&A and FP&A.

I also teach Financial Modeling (like a human, not a textbook).

Here are the 3 best ways I can help you:

1. Learn the Basic 3 Statements in 45 minutes

2. Download my Advanced 3 Statement Template (great for FP&A pros)

3. Learn to model like a Private Equity pro (the course I mentioned above)

Until next time.

--Chris