Private equity and Venture Capital in a changing world

Evgenia Sopochkina MBA2021 shares her reflections after attending a recent fireside chat between Michael Moore, Director General of British Venture Capital and Private Equity Association (BVCA) and Luisa Alemany, Associate Professor of Management Practice and Academic Director of the Institute of Innovation and Entrepreneurship at London Business School. The event was jointly hosted by the Institute of Innovation and Entrepreneurship and the Private Equity centre at London Business School. Recording of the event is available below.

Current challenges: COVID-19, Brexit and ESG

In the current context of COVID-19 crisis, Private equity and Venture Capital (PE & VC) industry still seems to be in good shape relative to last year. Amount invested in VC and PE in Q1 2020 is at the same level as in 2019 in the UK and Europe, with minor differences, such as healthcare investments being up and B2B enterprise investments down. Nevertheless, most of these deals were already in the pipeline before the outbreak and luckily could be closed despite the lockdown. The more important question is what happens in the next quarter. Making new investments that are not follow-on, in particular in the PE sector where substantial amount of due diligence is necessary (e.g. visiting target company’s physical assets, factories, talking to employees, customers and partners…), would be more challenging. BVCA has been actively working with its members to support companies they invested in, and has been involved in the development of the Future Fund scheme. Even though the first £250 million made available by the UK government to start-ups quickly ran out, there is an optimistic outlook for future tranches to be made available in order to support innovation in the UK and Europe. 

In addition, another challenge of 2020 is Brexit and the future of cooperation with the European private capital. BVCA has worked closely with Invest Europe (formerly known as EVCA, European Private Equity & Venture Capital Association) for many years and there is a high level of cooperation between UK and European companies and funds. Businesses in Europe depend on London-raised funds and vice versa, especially in the VC sector. Although the regulatory framework post-Brexit is not defined yet, it is clear that there are shared interests and agenda between the UK and European private capital. 

Furthermore, PE & VC industry is under increasing scrutiny about demonstrating not only its economic value, but also the social value that it provides. ESG standards are shifting investment priorities in order to take into account issues, such as diversity & inclusion, climate change, social impact and others. BVCA actively works with its members and other stakeholders on these matters, by conducting forums and committees on responsible and impact investing, as well as collaborating with Level 20, an organisation that  promotes gender diversity. Ethnic and gender diversity remain a priority in the BVCA agenda, both for its members and for companies they invested in. 

Getting a job in Private Equity and Venture Capital

This is a pressing question for many members of the LBS community. PE & VC industry is known for the very small teams and it is unusual to have more than 50 employees at one firm. Therefore, it is quite challenging to break into the sector, but one should not be discouraged. 

There are multiple entry points that are becoming even more diverse. Some of the traditional routes into the PE & VC industry are through previous experiences in banking or consulting. Historically PE & VC firms tended to hire experienced professionals, but now the trend is shifting towards more opportunities for direct entry of graduates. There is also a need for the skills and expertise of former entrepreneurs and tech specialists, in particular in the VC sector. Whatever your background is, in order to successfully start and develop a career in PE or VC, networking is essential, as the recruitment process is often not structured. BVCA is focusing a lot on its members’ networking, training and sharing best practices. 

Finally, there is also an option of setting your own fund, which is a very long but rewarding endeavour. BVCA provides a lot of support to encourage this type of activity, with their Emerging managers forum and other initiatives. As mentioned by Michael Moore, besides complex regulatory requirements by FCA, when setting up you fund, as with any other business, you would need to think  about:

  • Yourself: Your background, credibility, leadership skills and experience,
  • Your clients: Your institutional investors and what their mandate is, how much they want to allocate to PE & VC funds,
  • Your value proposition: Your unique compelling proposition that would convince investors that you can provide sufficient return on their investment and generate economic and social value.

Watch full recording of the event: