Episode

Key Takeaways

Growth equity targets private companies with proven traction and high growth rates, typically pre-IPO.
Investment strategies are converging, with major firms now managing diverse growth equity and venture funds.
Valuation in growth equity relies on revenue multiples and future exit projections, rarely using DCF analysis.
Successful recruiting for growth equity roles involves specialized preparation, networking, and leveraging recruiter incentives.
Critical career moments often demand calculated risks and confidence in one's professional path.

Mike Hinckley, founder of Growth Equity Interview Guide, entered the field to assist individuals transitioning into growth investing.
Growth equity involves investing in private companies that have achieved traction and are accelerating growth.
These investments are typically pre-IPO and post-venture, focusing on firms with product-market fit and 20%+ annual growth rates.
Unlike traditional private equity buyouts, growth equity usually involves taking minority stakes to partner with management.

Venture capital focuses on projecting unit economics and market size for potentially high-growth, not yet profitable companies.
Growth equity firms can provide large multi-billion dollar checks for companies such as Lyft or Epic Games, which smaller venture funds cannot.
The growth stage is segmented into 'late-stage venture' (investing in cash-burning companies with positive unit economics) and 'traditional growth equity' (investing in profitable, cash-generating companies).

The 'Rule of 40' is a key metric for B2B SaaS companies, combining growth rate with EBITDA or free cash flow margin; a sum of 40 or greater indicates a well-run business.
Similar heuristics include the LTV to CAC ratio (lifetime value to customer acquisition cost), which should ideally be 3x or higher.
These metrics often originate from educated guesses validated by market data, exemplified by David Skock's work on LTV to CAC.

The Discounted Cash Flow (DCF) model is rarely used or tested in growth stage interviews, despite being a theoretical valuation standard.
Practical valuation often uses simplified mental models based on entry and exit metrics, projecting revenue growth over five years.
Revenue multiples are frequently used as the primary metric for growth-stage companies, especially unprofitable ones, contrasting with Price-to-Earnings for public equity or EV/EBITDA for buyouts.

A key aspect of growth investing is 'recursive logic,' projecting what a business will look like in five years and how public market investors will value it.
This involves balancing current market comparables with future five-year projections, especially for pre-IPO investments.
High entry multiples for fast-growing companies necessitate assuming multiple compression over time as growth slows, requiring rapid growth to compensate for potential valuation multiple decreases at exit.

An online course helps hundreds secure positions at top growth funds, covering valuation, financial modeling, and market thesis development.
The self-paced course addresses a gap in resources, specifically for growth-stage modeling and investment theses, which differ from LBOs.
Training includes handling mock cold calls, a common interview tactic for growth funds simulating interactions with CEOs.
Growthequityinterviewguide.com offers the course and the claimed largest job board for growth and late-stage venture roles.

The U.S. recruiting landscape in New York and San Francisco features 'on-cycle' hiring, where firms like General Atlantic engage recruiters, often two years in advance.
Recruiters act as gatekeepers, prioritizing qualified candidates; candidates must prepare diligently for initial interactions.
Job seekers are advised to generate interest by interviewing with multiple firms, and to leverage recruiter compensation models by signaling other offers to encourage more opportunities.

A candidate recounted declining a compelling private equity offer to pursue growth funds like General Atlantic, despite external pressure.
They leveraged an alumni network at General Atlantic for an accelerated interview process, aiming for an offer within days.
The candidate declined an offer under pressure from Welsh Carson, opting to bet on themselves and pursue General Atlantic.
This led to a fast-tracked offer from General Atlantic, before others in the class, and an unusual exception for the COO meeting.