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8 Replies Last post: Nov 10, 2008 7:41 AM by amspcs

Want to Start a Private Equity Firm but theres a problem...

Jun 28, 2008 12:29 PM

Click to view AcharyaInc's profile Professional AcharyaInc 7 posts since
Jun 28, 2008
Goodday all

I'm came across the idea of starting a PE Fund/Firm a few months ago and have not been able to stop thinking about it. I always felt I had a rare quality in being able to boil down a business and see whats good about it, whats wrong with it and whether its going to be profitable. I have always been known as the business-minded person and feel confident in my ability to run a profitable firm (well, sort of). Hence, I am really interested in starting my own private equity fund. I have done tons and tons of research but the only thing holding me back is that im 22 years old with work experience in accounting through internships and one year of law school under my belt. What would you advise me to do? Would you ever invest in a fund run by a manager in my shoes?

Thanks in advance,

Anand
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Click to view LUCKIEST's profile SCORE LUCKIEST 7,939 posts since
Aug 6, 2007
1. Re: Want to Start a Private Equity Firm but theres a problem... Jun 28, 2008 2:38 PM
in response to: AcharyaInc
Want to Start a Private Equity Firm, Welcome

I now know that you are 22 years old. Tell me more. Where are you??

Have you ever worked for a Private Equity Firm??

Where do you want to be 8 years from NOW??

How do you plan on getting there??

LUCKIEST
Click to view DomainDiva's profile Mogul DomainDiva 1,732 posts since
Oct 10, 2007
2. Re: Want to Start a Private Equity Firm but theres a problem... Jun 28, 2008 4:30 PM
in response to: AcharyaInc
I am a fairly seasoned investor and my husband stays home to trade all day. No I would not give you any money to invest.

If your goal is a private equity fund then you need to get a degree in finance and get a job with Goldman Sachs and start out like all the other fund managers have...at the beginning.

None of the super rich have started at the top...they all started at the bottom and worked their way up. Managing a private equity group/fund is a 24/7/365 job.
Click to view Lighthouse24's profile Mogul Lighthouse24 2,396 posts since
Oct 10, 2007
3. Re: Want to Start a Private Equity Firm but theres a problem... Jun 28, 2008 4:39 PM
in response to: AcharyaInc

My advice would be to get face-to-face with someone who is currently doing what you want to do (which probably isn't anyone in this Small Business Owner's Community, by the way) and ask that person. Be prepared for the answer to involve "paying some dues" -- because (no offense) I wouldn't invest in a fund managed by someone with your limited experience.

You have an objective -- so you're already way ahead of many 22 year olds. That's a start. Good luck in moving forward!
Click to view AcharyaInc's profile Professional AcharyaInc 7 posts since
Jun 28, 2008
4. Re: Want to Start a Private Equity Firm but theres a problem... Jun 28, 2008 5:24 PM
in response to: DomainDiva
What I got from your post is that you would want the person to have a degree in finance and have experience working at Goldman Sachs or the sort. My questions to you then would be 1) What if I majored in accounting? Can that be helpful? I also am planning on getting a j.d. (law degree) and maybe starting to consider a MBA. As an investor, would those three degrees comfort you? 2.) What if I dont have experience from say Goldman Sachs but I do have experience working in the Private Equity department of a large law firm?

Your insight is greatly appreciated.

Thanks

Anand
Click to view AcharyaInc's profile Professional AcharyaInc 7 posts since
Jun 28, 2008
5. Re: Want to Start a Private Equity Firm but theres a problem... Jun 28, 2008 5:25 PM
in response to: Lighthouse24
Would you suggest I get face-to-face and ask if I can acquire some experience or ask for an investment?
Click to view AcharyaInc's profile Professional AcharyaInc 7 posts since
Jun 28, 2008
6. Re: Want to Start a Private Equity Firm but theres a problem... Jun 28, 2008 5:28 PM
in response to: LUCKIEST
Yes, I am 22 years old from southern NJ. The precise problem is that I have absolutely no experience working in a private equity firm. But in a perfect world, in 8 years I would be managing a fund or several funds with a combined total of $10M under management. However, I understand that to get to such a enormous milestone, I have mountains and valleys to go across. Any advice (and pep talks) are appreciated!

Anand

Click to view Lighthouse24's profile Mogul Lighthouse24 2,396 posts since
Oct 10, 2007
7. Re: Want to Start a Private Equity Firm but theres a problem... Jun 28, 2008 5:41 PM
in response to: AcharyaInc
Neither. I'd ask, "If you were in my position, just starting out, but wanted someday to be where you are right now, what are the first three things you'd do to move yourself in that direction?"
Click to view DomainDiva's profile Mogul DomainDiva 1,732 posts since
Oct 10, 2007
8. Re: Want to Start a Private Equity Firm but theres a problem... Jun 29, 2008 9:00 AM
in response to: AcharyaInc
I was giving you some general things to pursue. You need to find a PE mentor and get some guidance. Accounting...law .... MBA ...it seems as though you are really scattered now and have not yet decided what your foundation should be. An accounting degree only tells me you can add numbers and maybe do my taxes. As an investor I want to see some business sense and street savvy.

JIm Cramers' website is not called thestreet.com for no reason at all.

Bottom line is you need to pay your dues on Wall Street first, however that happens...with a law firm PE department or Goldman does not matter to me but it may to someone else. People with huge amounts of money to invest don't do it lightly.

Remember you have to have at least two things to get PE investment:

Connections and a proven track record with numbers to prove it.

These things you get by starting at the bottom. If you want to manage a PE then you need to start doing the things that will get you there. Find a mentor and make the plan...if its different from what you are doing then you will need to adjust to make your dream come true.
Click to view AcharyaInc's profile Professional AcharyaInc 7 posts since
Jun 28, 2008
9. Re: Want to Start a Private Equity Firm but theres a problem... Jun 29, 2008 3:06 PM
in response to: DomainDiva
:-) Accountants do a hell of a lot more than add, subtract and do taxes. As an accountant, I'm a quantitative analysis expert and therefore a business executive would not be able to get past me any possible red flags he/she might have hidden beneath a heap of other numbers. Most laypersons wouldn't be able to say that.

I don't believe I'm scattered with my foundation. As Donald Trump says, businessmen and businesswomen need knowledge in two areas to be truely sucessful - Business and Law.

I understand what you are saying as are far as having a track record.

I appreciate your advice and I'll keep it in mind.

Thanks
Click to view Lighthouse24's profile Mogul Lighthouse24 2,396 posts since
Oct 10, 2007
10. Re: Want to Start a Private Equity Firm but theres a problem... Jun 29, 2008 5:17 PM
in response to: AcharyaInc

You may not feel that you're "scattered" with your foundation, but you may want to consider that it could come across that way to others.

For instance, I'm now confused because your initial post says, ". . . experience in accounting through internships." Your second post says, "What if I majored in accounting?" Your latest post says, "As an accountant, I'm a quantitative analysis expert . . ."

Let's say that last piece of information had been in the initial post. I might have concluded that any Professor Emeritus on the topic would know who you are, and that all the major consulting firms (including the two I worked for before going out on my own) are actively courting you right now (one would probably be offering to make you a principal partner). That would certainly put you in a different professional situation than any of us understood initially.

Be clear and accurate about your credentials and experience. It doesn't matter how little you're starting out with -- you can get where you want to go with hard work. If you "fudge" on something basic, however, the credibility you need with key people may be shot for good.
Click to view DomainDiva's profile Mogul DomainDiva 1,732 posts since
Oct 10, 2007
11. Re: Want to Start a Private Equity Firm but theres a problem... Jun 30, 2008 7:19 AM
in response to: AcharyaInc

As Lighthouse pointed ot you have given three levels of accounting experience. I am now clueless as to what your experience really is and whether or not any of your statements are credible (though they may well be).

Still no investment money from me. You need to regroup, define yourself, make a plan, get a mentor, some contacts and experience.

You asy you are a 'quantitative analysis expert... however have you ever performed in this area? Ever done any forensic audits?
Click to view RickFelten's profile Mogul RickFelten 24 posts since
Oct 30, 2007
12. Re: Want to Start a Private Equity Firm but theres a problem... Jun 30, 2008 10:53 AM
in response to: AcharyaInc
A Dose of Tough Love: The number 1 task of a PE firm is to raise money, not to disburse it. To raise money, you must have a credible "story" to demonstrate to investors that the care & feeding of their money is in good hands. What others have tried to point out is that it is tough being credible to raise this kind of money as an accountant at 22 with limited work experience who has never worked in PE/M&A. Kinda like wanting to start out as a 5-star chef and not knowing how to cook. Not many openings for "fast lane" positions with zero experience & expertise.

You didn't post this to hear only negatives, so here is the upside. I would find some number of partners (between 1 & 2!) who have the PE and financial background you lack. Trust me, accounting is a good career but it isn't a great fit for PE work at the ownership level. Start working all of your financial connections (bankers, brokers, etc.) and find out who invests in the type of PE you want to specialize in . Since I believe you mentioned a $10 million firm, you will need lots of smaller investors because no one wants to be the "big fish" in that pond.

Of course, you will need all the prerequisites [legal & structural] before launching into this type of business and given your business acumen you probably have that aspect well under control.

Hope this helps & best of luck.

Rick...
Click to view masterbe2001's profile Start-up masterbe2001 2 posts since
Jul 1, 2008
13. Re: Want to Start a Private Equity Firm but theres a problem... Jul 1, 2008 3:06 PM
in response to: AcharyaInc
This is in responds to your ad I was in the same boat as you I am 21 I will be 22 later this year. I have been around business my whole life mother worked for Goldman and lehman in the 80s my family own several business all my friend parents owned there own business. And I to have the ability to take apart a business and put it back together. But when I first decide that I want to start a investment group I had to decide if it was for the love of business or money and for me it was business. The second thing I did was I found a newly formed private equity group and watch them do a couple of deals. I learned the entire concept of the business from how to structure to how to raise money. The guys I watched gave me all the information and contacts I would need. But as I start to to look at myself I realized I was a little wet behind the ears and to try to get someone to give me money to invest was probably be a tuff thing to do. I had even toy with using my family contacts to move ahead but I realized that I wanted to do it alone. So I began looking for a middle market company to build and I have found one a great company it will give me the nesscary hands on I need. But then I realized that money was going to be a issue to finance the business so I found alternate source not VC or PE but many program that the goverment has that people do not even know of but growing up in my house you are bound to know every way of financing. Depending on your location and you maybe we can form some sort of private equity group let me know if you are interested
Click to view globalmpr's profile Authority globalmpr 14 posts since
Jul 2, 2008
14. Re: Want to Start a Private Equity Firm but theres a problem... Jul 2, 2008 4:48 AM
in response to: masterbe2001
I am in the same boat too. I am 23 and I just started my own investment company that I want to expand globally in the next couple of years. I also have been looking for people like myself to form an aliance with because as you alread know, it is a team effort that is not going to be easy. If you are ever interested in forming or discussing business, let me know.
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