Job search from a candidate's perspective
One of the cool functions in LinkedIn is being able to do a company and position search to see who has been there before. You can search on the title and in the advanced search you can uncheck “Current Positions”.
If you just do a search on the company, you can see if there has been a significant turnover within the company.
You can learn quite a bit from talking with people who have been in a company – validity of business model, available funds for growth, management style (or lack thereof).
Like many people who had never been in a start-up, I created a checklist of items:
1. Launch your idea
2. Office in converted warehouse space or cool mansion
3. Wear jeans to work (with expensive shirt)
4. Finally get to use a Mac at work
5. You have a great team who all left high-paying gigs to join
6. Burn former policy manuals in the fireplace (of course, your office has one)
7. Make millions
8. Go on book tour after you write a book on how to start a business
Okay, I have started my own firm and am involved in two other early stage firms as their CFO. The only one that is true is #1. The rest is just tough work to make #2-#8 become a reality (okay #8 might be a stretch).
Start ups are very tempting due to all of the potential upside. But trust me, you and your team do everything. It’s not just you don’t have an IT department when your computer or phone go haywire, etc. Actually, it’s worse; there is no infrastructure at all and in most cases don’t have the money to build one. So you are CXO of….a good idea… the rest you build with money you convinced someone to give you.
Start ups are addicting, because as founders/early employees, you believe that you will change the world. You are willing to trade security, higher pay, benefits, etc. for the chance to make your mark.
They are also a major lifestyle change and as likely to fail as my first marriage (which is a three beer story). A good idea without funding is still a good idea, but now it does not have a company.
My best recommendation is to pick up a book on Start-ups, like “Art of the Start” by Guy Kawasaki. Just to make sure you can live the lifestyle.
Beyond the prepping for the ‘zinger’ questions about your background, I always created at least a page or two of questions for every interview. These questions helped put into context what I had heard or read.
My list was in three sections:
1. The person – their background, time with company, view of industry, etc.
2. The business – questions that I could not get answered by looking at the web site, talking to former/current employees, etc.
3. The position – Expectations, etc.
See the Candidates’ Toolbox for an outline of my questions.
At the beginning of each interview, I would say I had questions which usually lead to the person I was meeting suggesting that we begin there.
I was able to learn very important information through my questions, as well as present the relevant points of my background. We rarely walked through question by question, as often more than one question was addressed in a single answer.
Like public, privately-held, or family companies, those owned by Private Equity (PE) firms have their own style of running a firm. Understanding their style will help you with both pursuing a role and being successful. Please note that I am simplifying the PE world – so if you consider a role with a PE firm, more research is necessary.
How do PE firms operate?
· Using very simple terms. PE firms raise capital in an ‘investment fund’. That capital is used to acquire firms with strong expectations for growth. After a holding period, the ‘investment funds’ are liquidated by selling the companies owned by that fund. If all goes to plan, the gain on the sale is split between the investor and PE firm.
Who works for PE firms?
· I’ve met with several dozen PE firms and generally speaking most of the team comes from M&A or Investment banking backgrounds. Why? Because their focus is generating a return on capital.
Who manages companies owned by Private Equity firms?
· Besides putting capital to work, the second key skill of PE firms is selecting solid management team to invest in.
· Many firms will bring in operating executives to help select firms, but even those executives only serve in an oversight capacity.
How long do PE firms own a company?
· The holding period for PE firms is usually 5 – 7 years.
· Increasing EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) during the holding period is the prime objective, so they can sell the company at a higher value than when they acquired it.
· Understanding the holding period is important as an employee. If proposed strategies/investments do not generate a higher EBITDA before the end of the holding period, then they are generally not approved.
Will PE firms invest into the companies they purchase?
· Absolutely. Many PE firms will buy a marquee firm and acquire other smaller firms to ‘roll-up’ under the initial firm, as the management team has the strength to run a larger operation.
· PE firms will provide the management team with a specific amount of money that is available for acquisitions which fit their investment criteria and timing.
Who do PE firms like to hire?
· Generally speaking, no one. Why? Because they would rather stick with the team they acquired.
· If a firm needs to hire someone, especially in management, the focus is on hiring someone from the industry. If they have experience with prepping firms for sale, then even better.
· PE firms simply do not have an extended period to develop talent, so better to buy those who can immediately contribute toward EBITDA growth.
What happens when PE-owned companies are sold?
· Sold to financial buyer: Generally, he management team and company continue to operate as usual – just under different owners.
· Sold to strategic buyer: A strategic buyer is more likely to have their own management team and staff – which will result in more change for the existing staff.
So what to expect
· Focus on strong financial control (read: cost control)
· Company will have debt (part of the PE acquisition)
· High expectations for near-term returns
· New ownership and possible need to find a new firm
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