Landing The Most Lucrative MBA Jobs In PE, VC & Hedge Funds
Maria |
July 13, 2021

On this week’s episode of Business Casual, listen to John, Caroline and Maria tackle TWO topics: 

First, many post-MBA jobs are known to be extremely lucrative. Among the most sought after roles are roles in private equity, venture capital and hedge funds. What does it take to get one of these roles? How does one get a chance at entry into what can be considered an “exclusive club”? 

Secondly, a lot of MBA programs are dropping their requirement for two letters of recommendations for only requiring ONE. Is this going to be a trend? Why are schools moving in this direction? And what makes for a strong recommendation letter? 

Listen to find out!

Episode Transcript

[00:00:07.330] – John

Hi, everyone. This is John Byrne with Poets and Quants. Welcome to Business Casual, our weekly podcast featuring my co host Maria Wich Vila and Caroline Diarte Edwards. Maria is the founder of Applicant Lab. And Caroline, of course, is the former director of admissions at INSEAD, who now is co founder of Fortuna Admissions and advises a lot of applicants on how to get into a great school. So we have two topics today. First topic is we are seeing more schools, and we expect to see more schools go with only one recommendation letter for applicants. Columbia Business School and MIT Sloan are two of the M7 who do this. We have heard that there will be another major school shortly to announce one recommendation letter policy. We’re going to talk about is this going to be a trend and why and why is it so difficult to get good recommendation letters to begin with? The other topic we’re going to explore we’ll do this first is the jobs post. MBA really are among the most lucrative jobs available to an MBA graduate. And that would be those jobs in private equity, venture capital and hedge funds that pay massive amounts of money to people.


[00:01:21.280] – John

Just give you a sense of this. Stanford MBA last year who went into private equity, their average first year compensation, $200,667 investor capital, $197,000. Those numbers include someone at Stanford who went into private equity at a base salary of $400,000, and someone else who went into venture capital reported a $300,000 based salary. Now you might think that there aren’t a whole lot of people who are in this position to take these jobs, to get these jobs, but in fact, today an increasing number of people who are in the elite MBA programs are seemingly landing them. So at Harvard Business School last year, 18% of the class went into private equity, 5% into venture capital and 7% in hedge funds. At Stanford, 15% went into private equity, 9% in venture capital. At Wharton, a little bit less so, but not so less, 12% into private equity and little over 4% adventure capital. What does it take to get one of these jobs, Caroline?


[00:02:27.710] – Caroline

Well, I think they’re really cherry picking students from top business schools. So they’re looking for often blue chip credentials. Right. So they’re hiring candidates who have worked in banking or perhaps have even worked in another private equity house or bench capital before coming to business school. That is the ideal background, right. They love hiring people from the industry, but otherwise, if there are any career switches and it’s incredibly difficult industry to switch into because they tend to hire people who, as I said, who are already in it. And so many people want to get into it. So it’s incredibly difficult to get hired into it if you don’t have that background. But otherwise they tend to hire people from investment banking or other financial services backgrounds and also people from the top consulting firm. So typically McKinsey, Bayne and BCG, those candidates can have a shot at getting interviews with private equity and venture capital firms.


[00:03:28.290] – John

Yeah. So it’s almost like an exclusive little club. An entry into the club is almost dependent on whether or not you’ve even worked in the club before or have one of these, like, elite type jobs at an investment banking firm that’s very well known and highly selective, or a highly selective elite global consulting firm to even have a chance to enter through the crack in the door. Maria, do you agree with all that?


[00:03:57.410] – Maria

Yeah, I think there’s a difference between private equity versus venture capital. The two are often lumped together with their cute little acronyms, but they are actually fairly different in terms of not only the work that they’re doing, but what groups of people they hire from. So I think my gut is that it’s easier to get into VC because if you have helped build a business before or if you can show that you add value to their assessment process in terms of maybe technical expertise or some other type of expertise of growing a business, I think that VC is a bit more open. Private equity, though, is a pretty specialized skill set. And part of the reason why they hire people who have already done it is because they know they won’t have to spend so much time training folks on what the job is. I mean, it’s a job that really values intense work ethic. And if somebody did two years of an analyst program on Wall Street and then from there leverage that to get a job, say two years at a private equity firm, then private equity firms coming to the MBA program.


[00:04:54.690] – Maria

So a pretty good idea that the people that they’re hiring know what they’re doing. So I sort of understand why they are this way. I think there is this. My former boss, my first job out of College had been a former banker at Lazard Freyer’s Investment Bank. And he taught me how to build the financial models that they use. And one of the things he said that he was pretty bitter with me. He was like, I spend 100 hours a week and I sacrificed two of the best years of my life in order to learn this stuff. And you’re learning it, and you don’t have to sacrifice so much. And he was actually sort of bitter about it. He was actually very bitter about it. He was actually very bitter about it. Like, it’s not fair. Like, you’re out of here by 07:00 p.m. Every night and you’re going to walk away with the same skill set that I sacrificed so much for. And so I also think that there’s a certain element of and I think we see this with the medical school field as well, with people who do residencies. And you hear these hellish stories of like the 7500 hours shift in the residency.


[00:05:46.810] – Maria

I think that part of it may be this idea that I went through this horrible boot camp, and I’m only going to respect people even if they can do the job. I’m not going to respect them unless they also suffered in the same way. But that’s just my own armchair psychologist take on it.


[00:06:04.430] – John

In other words, you’ve got to pay your dues. You’re going to be put through a boot camp. You’re going to be given hell. And if you’re not, you’re not worthy.


[00:06:11.770] – Maria

Yeah. I knew how to build a model as good or better than the typical banker by the time I was done, because Lazard in particular is very good with modeling. And so learning from him taught me the skills. But he was like, yeah, but you didn’t really earn it the way I earned it. I’m like, okay, buddy.


[00:06:27.890] – John

Why do these firms pay so much money?


[00:06:31.280] – Maria

Because they charge a lot of money, right? They charge their clients money. They make money for their clients, and they take a lot of good care from that. If they buy a firm, a company in private equity, let’s say they buy a company for $500 million and then sell it for $3 billion, they get a cut of that as they should. And so they pay their staff accordingly.


[00:06:55.170] – John

We will explain what carry is a really interesting element of the compensation. So as high as the base salaries or the sign on bonuses might be wealth, the real gold in these jobs is in the so called carry. Who wants to explain what carry is?


[00:07:13.710] – Caroline

Well, it’s the percentage that you will get. It’s part of the ownership of the companies that you’re investing. And typically you have to stay with the organization for a certain lengths of time to realize that upside. And it’s going to be worth something if ultimately the company is sold, as Maria said, and you realize a big upside. But as you say, is often how they make the really big Bucks.


[00:07:41.030] – John

Yeah. And the other interesting thing, of course, about these industries is that they’re not like McKinsey, Bane, BCG or Morgan Stanley or CD or Apple or Facebook or Google or Amazon. They hire generally in the ones and twos from MBA programs, and they tend to hire only from the most elite schools. I mentioned the stats from Harvard, Stanford and Wharton. Once you leave those three schools, these stats are so small, most schools don’t break them down in their employment reports. So outside of a Blackstone or Carlisle, two of the real big players, it’s almost hard to find these jobs because the players are generally unknown. They’re not well known, they’re not that big. So when they hire someone, it’s a big deal. And that, I would think, makes it that much more difficult to penetrate these industries. Do you think?


[00:08:37.480] – Caroline

Yeah, for sure. They’re hand picking candidates. And as you say, they’re often not high visibility first. They need to have such high visibility. So it’s very much word of mouth.


[00:08:50.990] – John

Do you have to know somebody to get into this? So let’s say you haven’t worked as an analyst for a PE or venture capital firm. Is it impossible to get in if you don’t really work hard on the networking aspect of getting into one of these firms?


[00:09:09.750] – Maria

That’s one of the benefits of business school. Right. Is that you’re going to be in classes with people who are either doing VC already or are going to do it soon. And so they might not be able to hire you right away, but they might be in a position to hire you several years later. So I have several classmates who did not start in DC right after business school, but they went to either very innovative divisions of large companies or they went to start their own company and successfully sold it. And so then at that point they entered the VC space later on. I do think with VC it’s easier. And I do think that with enough networking, which is, again, the value when we talk about like, oh, these more elite business schools tend to not give as much scholarship money. Well, there’s a reason for that, right. Because you are getting a network that if you hustle enough, you could convert into these more lucrative jobs, right?


[00:09:58.780] – John

Exactly. Now, you could look at this as an opportunity or as a problem. Private equity, venture capital and hedge funds. This is totally a white, male dominated field. And if you look at the stats, they’re really startling. There was a McKinsey study back in 2020 only a year ago, and it’s found that only 20% of senior leaders at private equity firms in the US are women, less than 2% are black, less than 12% of people of color. Another study released last year by women in VC found that less than 5% of venture capital firm partners are women, and only a third of those are women of color. Now one wonders, okay, with all of this emphasis on diversity and inclusion and the pressure being placed not only on these firms but firms overall, is there a crack in the door to allow more women and more people of color who have MBAs a shot at these three industries? I will tell you that one school thinks that way, and that is UVA Garden, which just announced a new program. It’s a full ride scholarship program for twelve people every single year who are either women or people of color into a two year curated experience that basically is meant to prepare you for one of the three industries, VC, PE or hedge funds.


[00:11:31.680] – John

And it will include everything from an internship to sponsorship by one of the firms to ongoing lectures to an independent project where you produce a pitch deck that then you can use to help land the job. And after you land the job, it will include everything from continued coaching and mentorship to help you succeed in these firms. And their goal is to, frankly, get more women and more underrepresented minorities into these three fields. What do you think their chances are of success?


[00:12:05.140] – Caroline

Well, I think it’s a very worthy endeavor. As you say, it’s a very male dominated and not incredibly diverse industry from ethnic perspective. And firms have been aware of this for some time, but I think they feel more pressure now to take action to change that. I’m sure that the school has recognized that there’s an opportunity to bring a pipeline through because there will be recruiting opportunities. The firms are looking to recruit a more diverse workforce, but as we’ve said, they’re often recruiting people from a very specific background and even coming from the same industry. And so if that pipeline isn’t there to start with, then it’s very difficult to change. You really have to start from the very beginning. And so I think it’s a very interesting idea and a very smart move by Darden and to also build relationships with recruiters who might otherwise not be recruiting so much at Darden. Perhaps they would be recruiting otherwise at seven schools, but with this program, it might give an opportunity to the school to attract recruiters who might not otherwise be coming to the school.


[00:13:20.490] – John

Yeah, that’s really true, because I rattled off those figures at Harvard, Stanford and Wharton. At Darden, according to their stats, roughly 2.4% of the class goes into private equity and venture capital. They say they have a record number right now of placement in DC and PE internships and full time jobs. 21 members of the full time MBA class of 22 are completing summer internships, and seven of their graduates in 2021 accepted full time roles in those fields. But clearly that’s far and away pretty small compared to Harvard, Stanford and Wharton. But so this is a real effort to make this a much more substantial part of placement and career development at Darten and to do it through the lens of diversity and inclusion. It’s kind of an interesting way to go about it. Maria, what do you think about this?


[00:14:24.010] – Maria

Look, it’s great that they’re doing it. The more diversity and inclusion we get, especially in fields where women and people of color have traditionally been shut out, the better. I certainly don’t think it’ll hurt at all for this program to exist. I do think it’s a little funny. I think if anything, I don’t know that they should be getting full scholarships. I think if anything.


[00:14:42.170] – John

They should be paying extra for because they’re going to leave jobs that are going to make them a fortune.


[00:14:47.950] – Maria

Yeah, they’re going to make a lot of money. I think one of the most important things they can offer is, in fact, that sort of apprenticeship, mentorship aspect, because I know venture capital in particular is an apprenticeship. It’s primarily an apprenticeship model. There are programs that have been out there for years. One of them is called the Kaufman Fellows Program, and I know because I was a Kaufman Fellow where they’re trying to bring like, women and minorities more into VC. But basically their pitch is like that they select people. It’s essays and interviews and like two days of interviews and all this stuff, and then they are basically giving the VC firms the stamp of approval, and they’re saying, okay, you don’t need to worry about training these green new venture capitalists. We will train them for you. That’s what we at the Kaufman Fellows Program do. So I wonder if Darden is at least on the venture side, copying, taking inspiration from what the Coffin Fellows have been doing have been doing all along. And I think so far it’s been a pretty successful program overall. So the more the merrier. And even if you train someone to become a venture capitalist and let’s say they don’t get that job right away, they might get it in 15 years.


[00:15:56.630] – Maria

Right. So I think that there’s certainly no downside to this.


[00:16:01.910] – John

Yeah. And it’s interesting because they’re not destroying money at this. And Incidentally, all the scholarships are merit based. It’s not need based, but they’re devoting themselves to a new suite of elective courses, the networking and mentoring from current industry professionals, access to career programs and leadership experiences with these VC and private equity firms through internships and Fellows programs, and then the independent study as well, that would be overseen by Darden faculty member as well as the sponsor, the company sponsor. So it’s really a pretty comprehensive program to put more people who aren’t there into this industry, and we’ll see how it goes. I think it’s a fascinating experiment, and particularly because it’s at a public University that is not in the M seven. And we do know, as we said before, these firms tend to love candidates from the really truly elite, highly selective schools out there with elite backgrounds, no less. It’s not only should you be going to Harvard, Wharton and Stanford, your undergrad probably needs to be stamped at Princeton, Yale, Harvard, Stanford, etc. E to actually get into these firms. But I do think this is the right time. People are under a lot of pressure to diversify the people that they bring in, particularly in this field, where really it’s white, male dominated over and over and over, and it has been for many, many, many years.


[00:17:35.780] – John

This could be a really nice opening and could result in some meaningful gains for a lot of people. The other thing we wanted to talk about or recommendation letters, and we’re interested because we just found out that another major school, we can’t tell you who it is, but it’s a big and important school in the game, and they’re going to go with a one letter recommendation policy, joining Columbia and MIT, which already require only one letter. What do we think of this? Is this good? What does it say about the difficulty of getting recommendation letters that are honest and Truthful and useful to admissions? Caroline, what do you think?


[00:18:20.450] – Caroline

It is very interesting, I think that maybe there’s a number of factors playing into this. The US scores in particular over the past, I would say ten years or so have whittled down the elements of the application, and so they’ve tried to streamline it a bit to make it easier for people to apply. And I think this may be part of that effort, just one less hurdle for people to overcome to apply. I am sure there is also an element of they are tired of reading recommendations that are clearly written by the candidate themselves, and that is definitely happening more and more. I mean, I’ve seen it over the past few years. Increasingly. It’s definitely a trend of candidates being asked by the recommenders to just ride it themselves. That happens much more frequently now than it did even five years ago and go back 1020 years think it was a very different situation. I think the schools are fed up of reading something that is clearly not entirely authentic, and perhaps there is overlap as well between the recommendations. From an NCR perspective where I work, I think it would be difficult to go down to one recommendation because the average work experience at NCAA for MBA students is about five and a half years.


[00:19:47.310] – Caroline

Right. Most of them have had more than one job and they may have had quite different work experience across two different positions or they’ve been promoted. There’s quite a bit of breadth there, and it can be difficult to get to full perspective on that from one recommender. So I think it may also be that the schools are looking to appeal to the younger candidates and make it easier for the younger candidates to apply. And if you’re only sort of one or two years into your career, it could be difficult to come up with a second recommendation. Right. I mean, the ideal recommender is your current supervisor. That’s the sweet spot. Right. And if you’re one or two years into your career, you’ve got your current supervisor. You may not have a former supervisor that you could go to former boss. And so then who do you ask? Do you ask your boss’s boss? Do you ask somebody who’s worked with you, but they’ve never supervised you? So I think there’s also an element of appealing to the younger candidates who write early in their careers and making it easier for them to apply.


[00:20:54.730] – John

Years ago, actually, it was in 2013, we wrote a story on how many applicants actually write their own recommendation letters. It was based on a survey put out by a Gap, which is the trade association for Admission consultants. And the survey was of applicants in that given year, and it found that 38% of applicants wrote their own recommendation letters. But the admission consultants back then believe the number was much higher, with as many as six of ten letters actually being written by NBA candidates. If you had to guess what percentage of recommendation letters today are actually written by applicants, what would your guess be?


[00:21:36.770] – Caroline

My God. Well, certainly the majority. I mean, there’s also degrees of writing it. Right. Have they written the entire thing themselves and the recommended just copy pasted, or have they worked on it together? Have they given them some bullet points? So there’s a Gray area there. I think it’s good for candidates to discuss the recommendation and even give them some bullet points and give them some input because you want to make sure that they know what is expected of them, because as admissions director, I did read recommendations where literally the response to each question was one or two lines, and that was not very helpful, and it didn’t add any value to the candidacy. So you do want to make sure that the recommended knows what is expected, and they’ve got some talking points that fit with what you’re saying about yourself. Right. And they’re highlighting strengths that are complimentary. But yeah, it’s a shame if people then go down the road of fully writing the whole thing themselves. I dread to think, frankly, what the percentage is. What do you think, Maria?


[00:22:46.030] – Maria

Yeah, I think, like you said, there’s providing guidance to your recommender, which I actually think I actually encourage people to do, only not because it’s cheating, but just because oftentimes recommenders might not know what is a business school even looking for with the best of intentions, focus on a task that you completed that is very impressive to the boss, but has no impressiveness at all for an admissions committee. So I do advise that people sit down with the recommender, either literally or perhaps Siberia over email. And so they’re like, look, I’d really love for you to focus on this story and that story, and then that way you can also avoid that overlap. Right. If you’ve got two recommenders, both talking about that same project, what a wasted opportunity. I would think in terms of people who do that, I would think it’s in the 80%. In terms of people who write it themselves. Yeah, probably around 50. If you could hook people up to a lie detector test, I think it would be at least 50%. I do think that it’s so easy, though, to tell, especially for certain people for whom writing does not come naturally.


[00:23:53.170] – Maria

They don’t realize how obvious it is that they have written their own recommendation. But people, they have voices when they write, they use certain terms of phrase, terms of phrase. They use certain expressions or certain figures of speech. And if that same figure of speech is in your essay, and then I see it on the next page on your letter recommendation, I’m pretty sure that you wrote your own recommendations, and yet I don’t see that. It’s interesting.





[00:24:13.400] – Maria

Because the schools, they protest and we don’t want this at all. They protest, and yet I don’t necessarily see them punishing. It’s almost like theatrical for me.


[00:24:27.860] – John

Here’s the other thing. I wonder if by requiring only one letter of recommendation, is it more likely that they will be Truthful, in other words, that the actual recommender will do it? Does it increase the odds instead of requiring more than one, is there a greater temptation for the applicant to just do it when the recommender says, hey, can you just draft something for me? What do you think, Caroline?


[00:24:55.970] – Caroline

Well, it could go either way. I mean, if you’re looking at some of the firms where they’re sending a lot of people to business school, and so some of the managers and partners are solicited frequently for recommendations, it’s going to reduce their workload. Right. So a lot of these people are frequently writing recommendations, and so if the schools switch from two to one, theoretically it could have their workload and perhaps I’ll pay more attention to it and put more individual effort in. So that could be the positive side of this.


[00:25:30.230] – John

Interesting thing is in Colombia’s case, for example, they’re actually telling you who they want the recommendation letter from, and they’re basically saying it should ideally be from your current supervisor. And if for any reason you can’t get one from that person, they’re asking you to submit a statement of explanation as to why you can’t. So if you’re going to recommend one, I think you have to be more stringent about who you accept two, right, Caroline?


[00:25:56.340] – Caroline

Yes. And the current supervisor is always the ideal recommendation. In any case, I often speak to candidates who are concerned about asking their boss for recommendation because then they’re signaling that they’re going to leave. But in general, that conversation in most cases goes very well. And it’s much better for you to get that currency provider because the schools want to understand how you’re performing now, what impact you’re having now. And probably as time has gone on, you’ve taken on bigger projects and got more responsibilities. So you’ll probably have a more impressive recommendation from someone who’s supervising you now than from someone who supervised you a couple of years ago.


[00:26:42.450] – John

Do we think there are going to be more schools to do this? Obviously, we know of one that will, and we have Columbia and MIT, which two big members of the M Seven, which one would think might send a signal to a lot of other schools that this is okay and it’s worthwhile. What do you mean?


[00:27:02.070] – Caroline

Yeah, I think it’s interesting with two M seven schools, that’s a big move, right. So I would imagine that others will probably follow suit.


[00:27:11.970] – John

Maria, what do you think?


[00:27:14.250] – Maria

Yeah, I think they will. It sounds like that second recommendation is not yielding a lot of value, and it certainly is a lot more work. I personally think it’s sort of a shame because I think most human beings out there can charm at least one senior person in their company. But to be able to charm and also manage. Right, because you have to manage your recommenders. And recommenders are, by definition, people to whom these are people who owe you nothing. These are people who normally senior to you or their clients or something like that. And so I do think that being able to get more than one recommendation is a positive sign of someone’s political finesse. But it sounds like the schools don’t feel that they’re getting a whole lot of value out of it. So why put everyone through the pain of getting a second recommendation and reading a second recommendation if it’s just creating busy work for everyone all around?


[00:28:05.380] – John

That’s true. But Caroline Maria raises a good point there. It does require more finesse and more skill to get two recommenders as opposed to just one. And that may tell you something about the candidate in and of itself.


[00:28:18.770] – Maria

I have to get three recommendations. When I applied, I needed three. I was sweating bullets on that third one. I was like, what am I going to ask? So I don’t know. I think it has value as an exercise for the candidate just to show that they have three people, two or three people willing to go to bat for them.


[00:28:35.950] – John

But oh, well, the other interesting thing about this, I think there is a problem that Caroline mentioned. There are a lot of NBA candidates who don’t tell their bosses that they are going to an MBA program, and after all, you apply to a certain set of programs and you don’t know for sure that you’re going to get in. And frankly, the odds are against you to begin with, given how selective they are at the top end and you don’t want to signal to them. And in this case, you kind of have to you have to tell your direct supervisor to get the best recommendation letter for your application or multiple recommendation letters. So you’re kind of put in this very difficult place as well.


[00:29:20.180] – Caroline

Yes, that’s true, but it’s something that candidates often get very concerned about and honestly recommenders understand that you are probably going to have a career in the long term that is not going to revolve around that one person working for your current boss. And ultimately, you’re probably going to go on to do something differently. And hopefully they want the best thing for you as an individual and happy to support you in pursuing your longer term goals. So it’s very rare that a boss is not supportive of this. It does happen, but it is rare. They normally are able to find in the depths of their hearts and generosity of spirit towards their staff and support them in their goals. And also, people understand that you’re putting yourself through a competitive process and it might not work out And I don’t think people should be embarrassed about it if they don’t get in. It happens all the time. Great. People get rejected from the top schools every year and it’s nothing to be embarrassed about.


[00:30:32.490] – John

The other thing about one recommendation letter, though, is you put all your marbles on one person While generally you should have the kind of relationship with your recommender to really know that you’re going to get a very positive recommendation from them. It’s surprising to me how many recommenders say things that hurt candidates and I say this as an outsider who has had the privilege of sitting in admissions committee meetings at three different schools over the past years and having someone at those committee meetings read a recommendation letter that’s shockingly damaging to a candidate. So if you only have one recommender and they say something that’s even just slightly damaging Would it completely knock you out? Or if you had two or three that one slightly damaging comment might be in the context of two overflowing with praise recommendation letters that would therefore offset whatever slight handicap you’ve been given.


[00:31:41.110] – Caroline

What do you think it’s like having one interview versus two?





[00:31:45.100] – Caroline

It’s more pressure for that one event to go well, yes, it’s going to mean that that individual recommendation Is going to carry more weight to the process and you’re right, there is more risk involved.


[00:31:58.090] – John

Well, there you have it. So we have Columbia, we have MIT, we have another third school about to announce that it’s going to one recommendation letter policy for applicants. You’ll find out soon enough. As soon as they announce it, we can say it, right?


[00:32:12.290] – Caroline



[00:32:13.390] – John

Good. Okay. Well, there you have it. Thanks for listening to Business Casual. If you want a job at PE, VC or hedge funds make sure you have a good recommender. This is John Byrne with Poets and Quants.


Landing The Most Lucrative MBA Jobs In PE, VC & Hedge Funds
Maria |
July 13, 2021


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