“Access is everything.” – Yoshi Honkawa, a member of Modern Healthcare’s Health Care Hall of Fame
I met Yoshi at a trustee scholarship “meet and greet” event at the University of Southern California, Los Angeles where benefactors were brought together with the students who had received the benefit of their generosity. I was one of the sophomore scholarship students. At the end of that meeting, Yoshi, a national leader in health care administration and policy, gave me his business card and told me to call him when I was ready to embark on my career. Since that meeting, I’d misplaced, threw away, and spilled coffee over countless bits of paper—notes from class, shopping lists, phone messages, and the like. But I kept Yoshi’s card safely tucked away in my wallet, and when I became a senior, I dutifully called him.
By this point, I had already decided that I wanted to work on Wall Street. In the two years after I met Yoshi, I had convinced a financial advisor to let me intern for him, and worked my way up as a cold caller at another retail brokerage firm. I passed the Series 7 exam at the age of 20, working market hours from 6 a.m. to 1 p.m. while taking classes in the afternoon. I loved the heady feeling of being on the trading floor and the excitement of the markets. This was going to be my career!
So I called Yoshi. He was surprised to hear from me. After all, it had been a couple of years. He said that he gave his card to many students, but few actually call when they are ready. I was shocked to hear this. Why would any ambitious, young professional forgo access to the powerful reach and breadth of Yoshi’s Rolodex, forged over years as the head of industry and government relations at the prestigious Cedar Sinai Medical Center in Los Angeles?
Thanks to Yoshi’s network and access, I was able to secure a first interview in the San Francisco office of a large Wall Street firm, and after several months of ceaseless anxiety and countless follow-up interviews, I landed a two-year analyst position at Goldman Sachs, Chicago. I spent the next 15 years in institutional sales and trading on Wall Street before embarking on my career in private equity. I leveraged the experience I had gained on the front
lines of client relationship management to senior business development and investor relations roles within private equity.
I often run into young people who feel like the many students who took Yoshi’s card and failed to call him, that they should somehow make it “on their own.” But this is the great fallacy borne from the hubris of youth. Most people owe their success in some part to others who have supported and believed in them, beginning with their own families.
Nowhere is this truer than in private equity. The world of private equity, more than any other that I can think of, is built on relationships. Private equity fund investors (limited partners), investment managers (general partners), and their teams make commitments that are structured to last for decades. The typical structure of a private equity fund is 10 years, with an optional two-year extension. This gives the manager the running room to find the investments (portfolio companies), transform them, and ultimately exit, usually via an IPO process or a sale to a strategic corporate investor—or even to another, larger private equity fund. Relationships matter, and assessments of internal relationships for purposes of efficient decision-making and team cohesion (as well as of external relationships) are major diligence points for investors when vetting investments with private equity fund managers. Networks and access are the underpinnings of a successful strategy. People who succeed in private equity are usually master networkers. They leverage relationships in all aspects of the private equity process from the initial deal sourcing to identifying management talent for their portfolio companies, and from negotiating exit partners to, perhaps most importantly, securing capital for their funds from people who believe in them and their long-term vision.
The private equity landscape is highly fragmented. This provides abundant opportunities for someone looking to break into the industry, but at the same time, underscores the importance of access and relationships because most of these firms do not have large analyst training programs or big HR departments recruiting on campus. According to Preqin (one of the leading providers of analytics in the alternatives space), as of December 2016, there were 7,500 PE firms worldwide. In aggregate, these firms raised more than $2.9 trillion dollars in funds under management from 2007 to 2016 across various private equity strategies, including Venture, Buyout, Distressed PE, Mezzanine, and Growth Equity. Given the size distribution, it is not surprising that, except for the very largest private equity platform with mammoth assets, the typical PE fund manager has a lean staff (both deal making and operational/marketing) with a strong emphasis on internal promotion. To give a sense of scale, according to Preqin, the median buyout fund is around $200MM, with seven deal-making employees and three senior support staff, including marketing (investor relations) and operations (COO/CFO). For someone looking to join the “buy side” of the ecosystem (allocators of capital to these fund managers), the universe is equally robust. There are nearly 6,000 institutions listed as actively investing in PE globally, with foundations, pension funds, and endowments comprising the largest piece of the pie.
Given these highly relationship-based industry dynamics, as a senior professional responsible for investor relations and client development activities, I find that I need networks and access just as much as I did when I was first starting out. For that reason, organizations, such as the Private Equity Women Investor Network (PE WIN), of which I am a founding member, have assisted me immeasurably in recent years. PE WIN is an organization designed specifically to connect senior women leaders in private equity with one another. Our goal was to create a trusting forum where we can leverage our relationships, learn from one other, and do business together.
Creating access and networks isn’t easy. In the case of PE WIN, we had to build it ourselves. There wasn’t a dedicated network for senior women in private equity, so we created it. Today we have almost 200 senior women members, including chief investment officers, directors of private equity investments, and senior investment and marketing professionals at the fund managers themselves. This was all started from a small core group of fewer than 10 individuals who met together for dinner one evening.
Look at your own experiences, and determine your niche. Everyone has a natural network, beginning with their classmates at college, their colleagues at the office, and peers in their industry.
But that is just the beginning. Having a network doesn’t equal access. One of the hardest things we all have to learn is the ability to “make the ask.” This makes you vulnerable. Nobody wants to admit that they need help. But we all do. But, by making the ask, you encourage people to make the ask of you. And that is how relationships are formed. With relationships, comes trust and loyalty.
Being successful in private equity requires a diverse set of skills that can be gleaned from many different experiences—investment banking, sales and trading, investment analysis, accounting, company operator, entrepreneur, and even seemingly unconnected specialties. However, all paths in some way or another will be influenced by the relationships you build along the way.
Just recently I received an e-mail from someone who, unsolicited, gave me a generous introduction to a prospective investor. The response to me was immediate. “When can you meet?” And then I thought back to my first meeting with Yoshi. Access was and is the start of everything. Don’t waste it. Be generous with your relationships, be generous with your time, and help others as much as you can. When you get access, deliver on the expectations. And remember that the world of private equity is built on just that: hard work, relationships, and access.
—Sylvia Owens, senior portfolio advisor at Aksia LLC