Private equity is one of the most competitive, and potentially highest paying industries that many come from a background in finance, investment banking or consulting into. Despite this, with limited experience it is still within the realms of possibility to get a start in private equity by following some key steps. Here are some of the best ways, in no particular order, to break into private equity with little experience.
Build a Strong Foundation in Finance
If you do not have relevant private equity experience, it is crucial to first of all build your financial knowledge. You should learn the baby steps which is financial modeling, valuation and accounting. Over 80% of junior positions in private equity specifically require you to have your financial modeling down cold, especially with regards to building leveraged buyout (LBO) models.
Online courses and CFA (Chartered Financial Analyst) are now a few ways to enhance your learning of finance. So far, over 178,000 CFA charterholders exist globally and more than one-quarter of them are engaged in asset management or private equity. For private equity firms specifically, they also will want to see that you can analyze financial statements and assess companies for investment opportunities. For instance, as a junior analyst you might have to crank out 5–7 company level financial statement analyses per day; that requires at least a basic acumen with finance so remember the importance of having solid finance foundation.
Key skills to focus on:
- LBO Models
- Financial Modeling
- Valuation of the company (DCF, comparable transactions, precedent transactions)
- Mergers & Acquisitions (M&A)
- Reporting and financial analysis
Gain Relevant Industry Knowledge
If you have a degree in finance or economics, this is advantageous but getting familiar with the specific industries where private equity firms invest – as well practical experience — can be equally valuable. Based on industry surveys, about 70% of PE investments are focused in the healthcare, technology, real estate and energy sectors.
Hence, a deep understanding of these sectors can greatly improve your chances to land in private equity. This includes the global healthcare market which is predicted to exceed 11.9 trillion dollars by 2024, and similarly, investment in the technology industry accounts for nearly an annual growth of just under eight percent per year on average. Learn about new developments in the industry, large transactions and changes to regulations that could impact PE investments.
Consider earning industry-specific certifications (like a real estate finance analyst certification) that can further refine your skill set, or sign up for seminars and conferences. This will show both your interest in private equity, as well as exhibit you can be intellectually flexible across business contexts. You can benefit from networking, such as the 1,000+ private equity proprietary industry conferences that take place worldwide in a typical year.
Pursue Internships and Actively Network
Internships are still one of the absolute best ways to break in, even if you have very little experience. Over 85% of private equity professionals have an internship between their Bachelors and getting a full-time PE job.
Even if you will not be able to get a private equity internship directly, internships at banks, consulting firms or VCs would still help. You will see deal processes, financial modeling and investment analysis in these roles which are helpful once you apply to private equity positions. More than 50% of the summer interns at top investment banks end up in private equity.
Networking is also key in the private equity space. It is said that 70% of private equity jobs are filled at a firm through some referral or personal connection. Also, go to industry events (even if they are about mergers), join finance-related groups on platforms like LinkedIn and interview professionals in the space. By networking and making personal connections with people in the field, you become ripe material for recommendations or notifications when jobs arise. In 2019, internal referrals comprised around 72% of all private equity hiring.
Consider Joining Smaller Investment Firms
The more significant private equity firms, such as Blackstone or KKR tend to demand much greater experience levels and exposure, and are very competitive. However, for smaller private equity firms or boutique investment companies — they are much more likely to be willing to take on candidates with less experience but a strong passion.
There are over 4,000 small private equity firms in the U.S., and they typically care more about one’s energy/enthusiasm to learn than anything else. But these small firms tend to give importance to industry knowledge, learning attitude, and passion. They also have flexible hiring processes compared with large companies.
Find regional or boutique private equity firms that work in smaller markets or specific industries, and customize your application to meet their requirements. These companies are oftentimes better learning opportunities than the more intense competition. In 2022, for instance, just below sixty of the smallest private equity firms required their new hires to attend formal training.
Highlight Transferable Skills
Even if you lack direct private equity experience, you can differentiate yourself by highlighting applicable skills useful in the industry.
If you ran an analysis on the financial performance, were a project manager or worked with enormous data collections — demonstrate these skills in your resume and interviews. According to research, over 75% of how employers look at your transferable abilities is through communication skills, project management and problem solving.
Key transferable skills to highlight:
- Analytical thinking and problem-solving skills
- Attention to detail
- Experience of managing and coordinating a project
- Meaningful financial acumen & business development experience
This will allow you to demonstrate your underlying abilities for private equity positions, which should signal potential employers. For instance, research performed in 2018 showed that candidates who succeeded at the transferrable skills were able to create more impressions than other candidates and also had more job offers.
Continuous Learning and Improvement
You must strive to learn and improve every day in order to break into private equity.
You can show your love for learning by working on projects or attending boot camps in the space, writing blog posts or forum topics about trends in private equity. With over 2,500 academic papers and industry reports on private equity being published annually, there is a wealth of information to help better inform your understanding and perspective of the market landscape. The more you grow your network, the more knowledge and skills you acquire, making yourself increasingly competitive in private equity with time.
Most professionals do not join private equity firms as their first job, rather they start with Investment Banking, Corporate Finance, or Management Consulting, and then enter into private equity after working for a few years. In 2019, more than 60% of private equity professionals had been working in the industry for over three years prior to pursuing their finance career. So, work to the fullest of your potential in order to improve yourself as much as you can and be ready for a career in private equity.
However, by being strategic and continuing to learn, as well as network, there are still ways for you to break into private equity with limited work experience.
Develop the skills required for current and future job prospects, network with professionals in the real world, and have faith in yourself. If you follow this advice, your path to a private equity career will begin.
