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    30 Replies Latest reply on Mar 8, 2010 7:51 AM by pe_aspirant

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

    AcharyaInc Wayfarer
      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
        • Re: Want to Start a Private Equity Firm but theres a problem...
          LUCKIEST Guide
          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
            • Re: Want to Start a Private Equity Firm but theres a problem...
              AcharyaInc Wayfarer
              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
            • Re: Want to Start a Private Equity Firm but theres a problem...
              DomainDiva Ranger
              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.
              1 of 1 people found this helpful
                • Re: Want to Start a Private Equity Firm but theres a problem...
                  AcharyaInc Wayfarer
                  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
                    • Re: Want to Start a Private Equity Firm but theres a problem...
                      DomainDiva Ranger
                      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.
                        • Re: Want to Start a Private Equity Firm but theres a problem...
                          AcharyaInc Wayfarer
                          :-) 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
                            • Re: Want to Start a Private Equity Firm but theres a problem...
                              Lighthouse24 Ranger

                              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.

                              • Re: Want to Start a Private Equity Firm but theres a problem...
                                DomainDiva Ranger

                                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?
                          • Re: Want to Start a Private Equity Firm but theres a problem...
                            bastron06 Wayfarer
                            DomainDiva,

                            I'm new to this board, but recognize the depth of many of your responses. I manage an investment club and would like to ask your opinion on this matter. TheRoyaleGroup@comcast.net. Do you have an email I can use to connect with you?
                          • Re: Want to Start a Private Equity Firm but theres a problem...
                            Lighthouse24 Ranger

                            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!
                            1 of 1 people found this helpful
                            • Re: Want to Start a Private Equity Firm but theres a problem...
                              RickFelten Adventurer
                              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...
                              • Re: Want to Start a Private Equity Firm but theres a problem...
                                masterbe2001 Newbie
                                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
                                  • Re: Want to Start a Private Equity Firm but theres a problem...
                                    globalmpr Wayfarer
                                    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.
                                      • Re: Want to Start a Private Equity Firm but theres a problem...
                                        masterbe2001 Newbie

                                         

                                        Sure email me at recreationalshare@yahoo.com
                                        • Re: Want to Start a Private Equity Firm but theres a problem...
                                          geom009 Wayfarer
                                          I hope that was an open invitation because I would like to
                                          talk to you also. email me at tfs_processing@yahoo.com
                                          • Re: Want to Start a Private Equity Firm but theres a problem...
                                            Jakuza Newbie
                                            I would like to know more as well; I am interested in shifting my
                                            career over to Private Equity and starting my own company in this
                                            field. I have over 15 years of experience in owning businesses and I
                                            have worked for a ventur capital company for a short period of time.

                                            I am interested in finding out if owning/starting a PE company requires
                                            you to have a Series 7 certificate or any other form of certificate; I
                                            am very interested in joining up with you guys globalmpr and masterbe2001.

                                            Also, what is the best structure for a PE company, is it incorporated, LLC, or other form?

                                            Please email me at cwittusen@gmail.com

                                            Kindly
                                            Chris W.
                                              • Re: Want to Start a Private Equity Firm but theres a problem...
                                                gregangulo Newbie
                                                I think if you share and co-ordinate your ideas with people privately or outside this forum, you could possibly come to a sound understanding of your venture. Next, simply accumulate your thoughts and ideas on paper or your computer so it will be easier for to write a business, marketing plan. Now, this is not necessarily a plan for you to submit to any one but a template to understand your strengths and weakness as you take steps closer to your goal. One never really knows where they will end up and remember, you will always meet people who will discourage your ideas, they are to be taken like smoke in the wind.

                                                I am a mechanic by trade and pursued auto for two years. I switched to construction labor and made a lot of money there enough to start a recycling business which I owned for 6 years, that business grew until I was made an offer I did not refuse and sold, a point of growing my business. After a couple of years I became a principal in a residential building business, a startup, with the combined efforts of this business we grew that business from 300k to 6MM in revenues, at that point I sold my stake and started a transportation business in 1996 with a partner, through our efforts we grew the business from 150k to 5.5MM, this company grew into a freight brokerage, transportation company with 3 divisions, we had become the largest employer in the area, we sold to a competitor.

                                                The reason I am telling you this is one never knows the path you will travel, I did not foresee any of the above, although I did take action and made sound decisions when oppotunity presented itself, along with planning and managing all the businesses to the best of my ability. I now work from my home trading futures/options, bonds and anything else I feel comfortable with. I am now 42. Knowledge and action are twins, each glorifying the other.
                                                  • Re: Want to Start a Private Equity Firm but theres a problem...
                                                    Jakuza Newbie
                                                    Gregangulo:
                                                    I agree, having a business plan is what I usually create for any business that get involved in and it is also necessary if you are looking for financing from angle investors or venture capital companies. I never had any problem making a business profitable and a lot of companies hires me to help them turn their companies around; now I would like to take that to the next level of making my experience into a fund with private equity.

                                                    However, I am not to clear on what is required for doing so; for instance, I have done real estate investments for a couple of years and I wanted to start doing a pooled investment (like a fund) and invest into larger transactions but I was told I needed a Series 7 certificate for that (currently reading through cram for S7). However, I was reading up on Reg-D and there it states that if the offering is non-public then there are no need and only during public offering are there need to follow Reg-D and be registered with SEC.

                                                    I still feel that the water is a bit murky and I am like most of the people here looking for some guidance in where to start as a newcomer to the PE sector, wanting to start my own PE company.

                                                    Kindly
                                                    Chris W.
                                                      • Re: Want to Start a Private Equity Firm but theres a problem...
                                                        gregangulo Newbie

                                                        This is a equity firm, review their website cpequity.com and for other answers in regard to your Pool Investment idea, you can go to this website greencompany.com.

                                                        I am aware of them simply because I have dealt with both of these companies. Both are helpful, any questions you may have about investment, tax and law will be answered by greencompany.com, however if your question are not anwered by there FAQ than expect to pay for their time. As far as private equity questions, cpequity.com are very competent, located in Connecticut (nice place) and there is a possiblity they may accomodate your questions.

                                                        I do not have a license to trade because I would be obligated by sanctioning bodies and I believe with the contacts I have and hardware/software I use there is not much in way of an advantage with a series 3. I have always felt if I really wanted to start a investment brokerage I would seek out a managing partner who is qualified. There are many ways to obtain your goal, it is not just the act of due diligence, it is about 'knowing thyself' and exactly what your capabilities are and what they are not. A good leader knows where he can excel and his limitations, you probably heard this before but I shall say this, 'two minds are better than one'.

                                                        Regards,

                                                        Greg
                                                          • Re: Want to Start a Private Equity Firm but theres a problem...
                                                            Jakuza Newbie
                                                            Greg:
                                                            Thank you for your response and the links to the 2 companies; I will research
                                                            both of them and strike up a conversation with Catterton Partners to see if I
                                                            can get some guidance from them. I completely agree on "two minds are
                                                            better than one" and I have a thought in my head that goes just along
                                                            those lines with what you stated, I do believe I can find a fare amount of PE
                                                            people and I will see if inviting one of them to become a board member might
                                                            assist me in my quest.

                                                            Anything that I learn along my way I will share on this
                                                            board.

                                                            Regards,

                                                            Chris
                                                        • Re: Want to Start a Private Equity Firm but theres a problem...
                                                          pe_aspirant Newbie
                                                          hi gregangulo

                                                          you have an impressive track record! how do you mange it?!!!
                                                    • Re: Want to Start a Private Equity Firm but theres a problem...
                                                      bmt2008 Adventurer
                                                      In July you wrote: ...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. Would love to hear more about these programs. Do you care to share?

                                                      Joe
                                                    • Re: Want to Start a Private Equity Firm but theres a problem...
                                                      arjun4u19 Newbie
                                                      hi Anand,
                                                      I am Arjun. I have a strong passion in investment and on the process of opeaning an investment firm. I assume we will have mutual benefit if we discuss more about it. you can send me email at arjun_gnp@hotmail.com.
                                                      • Re: Want to Start a Private Equity Firm but theres a problem...
                                                        craigvanko Newbie
                                                        Team up or partner with other persons, especially those who can compensate for your perceived lack of meaningful experience.

                                                        Or, start as a "fundless" firm - raise funds on a per-deal basis
                                                        • Re: Want to Start a Private Equity Firm but theres a problem...
                                                          Tracker
                                                          The two main players in Private Equity firms are those who bring in the money and those who bring in the deals.

                                                          If you are well connected to people with money you may want to focus on the former and can use that as a "door-opener" to possibly get into a PE firm. If not well-connected to money, then you would want to learn how to do the latter.

                                                          Anyone with a little specialized traning/focus can work with a Private Equity firm as a deal finder ... and get paid a very nice finder/referral fee. I know this because I work with many Private Equity firms and they are always looking for deal flow. If you don't get on and work internally with a Private Equity firm, you may want to focus on learning how to become a deal finder and bring deals to them.

                                                          Also, study how businesses are bought by sophisticated buyers/investors ... the methodology, uses of leverage, deal structure and resources they often use can be used by individuals on to buy your own businesses, even on smaller deals that most PE firms would pass on. I know this from experience as well.

                                                          Dennis Lowery
                                                          Adducent, Inc.
                                                          • Re: Want to Start a Private Equity Firm but theres a problem...
                                                            PEblogger Newbie
                                                            Hello Anand,

                                                            Your question about starting a private equity firm is fairly common, as private equity is exciting/challenging and the paycheck isn't bad either. It's great that you have a strong desire to enter private equity, and although you don't currently possess the traditional experience that general partners at private equity firms have, it doesn't mean you can't eventually.

                                                            You mentioned that you're in law school, well the head of the Carlyle Group, one of the most successful private equity firms out there, is David Rubenstein. Mr. Rubenstein started his career as a lawyer in New York after graduating from Univ. of Chicago law school, then he advised President Carter and eventually went on to start the Carlyle Group. My point is that although this isn't the typical path, you can still go on from nearly anywhere to work in private equity, with natural abilities, learned skills and some luck. (for more info on David Rubenstein: http://privateequityblogger.com/2008/09/david-rubenstein.html
                                                            It's rare (if it has ever happened?) that someone of your age opens a successful private equity firm because investors need to have some reason to believe you will bring them positive returns. And getting investors is only half the battle, you need to know how to perform due diligence and valuation, how to improve a company's performance, develop an exit strategy and satisfy investors throughout their commitment to the fund with reports on performance. I would suggest finding an internship in private equity to really figure out if it's what you're passionate about and if so, great, then work to build a reputation in the industry. Then maybe in not too long you can open that private equity firm and have a much easier time attracting investors and you will have all the technical tools to make those limited partners happy.

                                                            Best of luck,
                                                            Theo O'Brien
                                                            http://PrivateEquityBlogger.com
                                                            • Re: Want to Start a Private Equity Firm but theres a problem...
                                                              mkhosimoyo Newbie
                                                              hie

                                                              how are you are u still interested in starting a p/e am in africa , southern africa i.e. and in the advance stages of openning one up how far have you gone email me mkhosimoyo@aol.com
                                                                • Re: Want to Start a Private Equity Firm but theres a problem...
                                                                  Rock_Sanjose Newbie
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                                                                  I love this post i just got off the phone with my attorney
                                                                  fri and he gave some good advice.

                                                                  I first told him what i wanted to do iv been deep into the bulk REO and NPN world and want to grow a fund in
                                                                  order to flip these packages

                                                                   


                                                                  second i told him i would like the past of least resistance and equity fund is
                                                                  not it
                                                                  even though it sounds really sexy to tell someone i run a privet equity fund.

                                                                  A LP is much easier to do.

                                                                  If you do want to run a PF get partners that have and have a large track
                                                                  record.
                                                                  Second start small 100k one deal to build up your track record

                                                                  Iv been in RE since i was 17 i helped make someone money at 18 and have started
                                                                  over 6 company’s (s corps LLC C corps) only 3 broke 100k
                                                                  and don’t tell anyone you are 22 grow a beard that is want i did it makes you
                                                                  look 5 yrs older. And when people ask you how old you are tell them your 50 (in
                                                                  a joking way)

                                                                   

                                                                  if anyone is in the norcal area and would like to learn more about NPNS or bulk REOs let me know