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Opening the Doors to Private Equity
Wharton courses and "boot camp" help students break into the "apprenticeship business" of private equity.
Entering the private equity industry can be a daunting task. The odds are against finding positions in private equity businesses such as venture capital, mezzanine investing and leveraged buy-out firms (all of which rely upon private investment in contrast to financing through public markets). And even when newcomers land private equity jobs, they don't have weeks of professional training like their peers in large investment banks.
"Private equity is an apprenticeship business," said Dean Miller, a Wharton MBA graduate, co-president of the Wharton Private Equity Alumni Network and a partner at PA Early Stage. "There is no big company where you can go to get trained. You learn from the partners you work with. They are not professional trainers, nor do they have time to train. It is not like an investment bank where you walk into a training program."
To help fill this gap, Miller and other alumni helped sponsor Wharton's first Private Equity Boot Camp in May. This two-day program was designed to help students heading into internships and full-time positions in private equity to hit the ground running. "The idea occurred to me last year when so many students were having a very difficult time getting jobs," said Steve Sammut,Venture Partner at Burrill & Company and Chairman & CEO of Buttonwood Venture Advisors, LLC, who teaches private equity courses to Wharton students. "I thought if we had a program that students could talk about in their interviews, it might give them a leg up over competition."
Understanding the Language
"Before my summer internship at a VC fund, I was clueless about the industry," said Wharton MBA student Kiran Hebbar, who has a graduate degree in mechanical engineering and worked in design automation before entering Wharton. "The boot camp immediately after final exams in May gave me strong insights on the industry." Hebbar became interested in the industry through a cousin who started a voice-over-IP company and used to meet with VC's regularly. "Wharton helped in many ways," said Hebbar. "My conversations with classmates having private equity experience helped scale my expectations. The PE boot camp went a long way in helping me understand the language."
Wharton's private equity courses and "boot camp" helped 15 MBA students secure full-time jobs in 2002. And Hebbar was among 34 students who found summer internships in private equity, noteworthy in an environment that has become increasingly competitive due to industry contraction and the downturn in capital markets.
Building Knowledge
Wharton provides many opportunities for students to begin learning about private equity before they graduate. In addition to the "boot camp," Wharton offers a diverse set of courses on private equity through its finance and management faculty. Miller was one of the first students to take the Private Equity and Venture Capital Management course (MGMT 804) in his second year at Wharton. "I had already spent a summer in private equity when I took the MGMT 804 class," Miller said. "It confirmed that was the career path I wanted to take and gave me learning that allowed me to hit the ground running."
This introductory course, created in response to student demand, covers the basics of venture capital — including valuation, due diligence, alignment of interests through negotiation of the term sheet, corporate governance, and exit strategies. In 2000, Wharton added a course on Financial Principles of Private Equity and, in 2001, a course on Biotech Venturing and Entrepreneurship. In 2002, Wharton created a course called Private Equity in Emerging Markets, inspired by former Wharton professor Roger Leeds, who spent part of his career at the World Bank.
In the Private Equity in Emerging Markets course's first year, students completed projects in India, China, Africa and other locations through the International Finance Corporation, the private sector arm of the World Bank. The emerging economies course also contributed to the University of Pennsylvania's designation by the U.S. Department of Education as a Center for International Business Educations and Research (CIBER). Penn is as one of only 30 schools across the country to receive this four-year designation.
In addition to helping students break into private equity, the Wharton courses appeal to many students who are planning other careers. For entrepreneurial students, a knowledge of private equity helps them understand sources of financing for their ventures and to look at their business plans through the eyes of a venture capitalist. Other students use perspectives from the program when they join internal corporate venture funds that are modeled on outside private equity.
The Private Equity and Venture Capital Management gives second-year students a chance to apply their knowledge from other MBA courses to analyzing the business plans of entrepreneurs. "This ends up being a marvelous synthesis and capstone to everything they learn at Wharton," Sammut said. "They use marketing analysis, financial analysis and strategic analysis. It is a great opportunity to tie it all together."
Always New Things To Learn
Almost all of the executives who presented at the two-day boot camp program are Wharton alumni, most of whom are involved in the Wharton Private Equity Alumni Network, a very active organization with more than 400 members. Some 700-900 Wharton alumni are working in private equity, accounting for almost 10 percent of the industry.
Why do alumni give their valuable time for the boot camp? "It is about giving back," Miller said. "People who participate feel an obligation to give something back."
One of the big surprises for Miller in returning to the classroom is that students treat the 1999 graduate as an authority. "I will always be learning and will never, in my mind, be an expert," he said. "That is one of the things that is great about this industry. There are so many different things to encounter and there are always new things to learn."
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