Growth equity is a type of investment opportunity in relatively mature companies with potential for dramatic growth. These investments usually take the form of a minority investment (i.e., non-control) in the target company. Businesses use growth equity to subsidize the expansion of their operations, entrance into new markets, and acquisitions to boost the company’s revenues and profitability. Growth equity investors benefit from the high growth potential and moderate risk of the investments.
Like private equity (PE), growth equity is a common career progression for investment bankers (IB). Analysts in IB often dream of “graduating” to the buy side. While there are many advantages to moving to the buy side, hours can still be extremely long and extensive financial modeling work is still required.
Growth equity jobs attract top talent in the financial services sector. There are a number of key positions to fill at a growth equity firm, and virtually all of them require knowledgeable people in one role or another to fill the positions.
Because growth equity firms expect to employ top performers, they typically pay their employees generous salaries and performance bonuses, usually above investment banking compensation, but lower than traditional PE.
Ideal Personality for Growth Equity
The personality of someone well suited for working in growth equity typically has the following character traits:
Polished and presentable
Quantitative skills, while important, are less crucial in growth equity relative to traditional PE. One of the reasons for this is there usually isn’t a complicated capital structure that needs modeling, like in an LBO. There is generally more of a focus on the ability to solve problems, as well as understanding a particular industry’s dynamics.
Key Skills for Succeeding in Growth Equity
There are a number of key skills the most successful players in the growth equity business have in common. The first of these is solid business analysis skills. Growth equity professionals have to be highly skilled, both technically and intuitively, in order to evaluate companies as potential investments.
People skills, such as management skills, communication skills, negotiating skills, and networking skills, are also critically important, as they are in most finance roles.
Getting into Growth Equity
Generally speaking, it is a little easier to break into growth equity relative to private buyout equity. While investment banking experience is a definite advantage, a growth equity firm is more likely to consider non-traditional backgrounds as well (candidates who worked in a specific industry or management consultants).
A Day in the Life of a Growth Equity Professional
A day in the life of a growth equity professional can vary depending on specific responsibilities, the size of the firm, and whether there is a transaction in the works. Nevertheless, the day will largely be similar to that of a private equity professional. Growth equity professionals will usually spend most of a typical day working on a model to determine the potential returns on the growth investment. The professional may use information from a confidential information memorandum (CIM) and discussions with management and industry experts to create the model projections. Additionally, the professional is responsible for due diligence and may even have a role in sourcing deals (unlike traditional private equity where more senior roles will be the main points for sourcing).
Growth Equity Interviews
Interview prep is critical for landing a job in growth equity. The three main categories of questions in interviews are the following: behavioral, technical, and prior deal experience. For behavioral and technical questions, check out our investment banking interview guide, which will bear a strong similarity to the types of questions you’ll be asked in growth equity interviews. Assuming you have deal experience, you should discuss it in a way similar to how you have it written on your resume. Start with a summary describing the main deal/overview, and then dive into two or three key issues or pieces of analysis that you played a big role in, and how they impacted the outcome of the deal.
Preparing for a Growth Equity Career
A career in growth equity can be highly rewarding, both financially and personally. Growth equity professionals often take a great deal of satisfaction from successfully guiding their portfolio companies to new, higher levels of profitability.
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