Ep 4. What Career Changers Should Know About Pivoting to Private Equity from an HBS MBA/M.D. Alum
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In this episode, you will hear from Kyle Dempsey, who received his MBA from Harvard Business School, his MD from Harvard Medical School, and worked for Bain and Company before moving into Healthcare Private Equity. Listen as he shares what career changers should know if they are interested in working in Private Equity and get clarity on how to move beyond the buzzwords and understand the different areas within this industry.
Transcript
Victoria Hefty (00:00):
Hi, I'm Victoria Hefty and welcome to the Post-MBA Pivot Podcast, where I share stories of professionals who took unexpected, interesting, or unique paths after graduating from business school. Today, you will hear from a guest who received his MBA from Harvard Business School, his MD from Harvard Medical School, and worked for Bain & Company before moving into private equity. Listen, as he shares what career changes should know if they're interested in working in private equity and get clarity on how to move beyond the buzzwords and understand the different areas within this industry, as always, I like to dive right in and get the conversation going.
Victoria Hefty (00:44):
What was that either one moment or incident when you were either practicing or I don't know, it may be time for a change. Or I need something new. I'm just so curious about that.
Post MBA Guest: Kyle Dempsey (00:58):
I think I've got to start with a bit of a backstory for it to make sense, because that may help clarify a lot of different branch clowns in my path. So for me, when I first went to medical school the vision was to be a practicing clinician. And the goal was to bring healthcare to as many people as I could, that didn't currently have access to care. And really that goal all stem back from an incident that happened in high school to me. So my family was living without health insurance. I had a really bad shoulder injury in a baseball game, and that ultimately led me to dab a number of not so great interactions with the healthcare system and to make a long story short, it needed surgery, but couldn't find a doctor that would do surgery because I didn't have insurance and therefore really struggled for about a year or so.
Post MBA Guest: Kyle Dempsey (01:49):
So that's really what was the underlying motivation that pushed me to become a doctor was I wanted to make sure that people didn't have that similar experience to what I had. So when I started medical school, the vision was letting me be a practicing clinician and let me see patients that otherwise wouldn't have access, but the vision right from the start was always bigger than that, right? It was always about how can I have the greatest impact on that issue possible? And what became apparent very early in medical school was that the extent of that problem of people not having access to healthcare was so big. And so vast that even if I saw every patient for free for an entire year, I don't want to be able to touch 1500 people's last let's say, but the scale of the issue is tens of millions, hundreds of millions, unfortunately.
Post MBA Guest: Kyle Dempsey (02:40):
So that really caused me to explore other paths that would allow me to have a broader impact. And it really pushed me down to look at three other areas that I found I should augment my education with. One was public policy. Two was business, and three was public health. I sequentially worked through each of those pathways. I spent a summer in D.C. interning in a healthcare policy organization. We realized the policy path was not for me. That was because I found that a lot of decisions that were made in Washington, D.C. weren't necessarily the best ideas that were getting implemented, but rather the ideas that were most politically feasible. And so I didn't want to spend my career focused on that because I'd like to bring the best ideas to the world, not the ones that are just sort of politically relevant at the moment.
Post MBA Guest: Kyle Dempsey (03:32):
So that left me with public health as well as business. And so I just ultimately sat in classes at both schools. So while I was in medical school, I sat on some classes at the school of public health, sat in some classes at the business school and ultimately realized that the business path would be the most distinct relative to our work that I had done up to that point. So ultimately went down the business path, and this is what ultimately leads to you. The key point of your question, which is what caused the transition. So going into business school, and I guess just as context, this program that I ultimately did, which was an MD MBA program is five years. Total. You basically spent three years in medical school, full time, and then a year in business school full-time and then a semester at each place.
Post MBA Guest: Kyle Dempsey (04:16):
So going into that fourth year of the program, which was the business school year, I still plan to be a practicing clinician. So I was still planning to do residency after was still planning to do all that. And the vision at that point in time was I'll get this MBA. And then someday once I practice medicine, I'll start to be involved with hospital administration or healthcare system administration. And that would again, help me to amplify my impact beyond seeing individual patients. But what became very clear during the first year of business school was just the diversity of interesting careers that people had had prior to business school, many things that I've never even heard of before in my life, I had no clue what private equity really was. I mean, I heard about it in the news, but I didn't actually understand what it was or how it worked.
Post MBA Guest: Kyle Dempsey (05:02):
And it wasn't until I started hearing about my classmates who were in their mid to late twenties, who were having really huge impacts on the American Healthcare System, both through investments, they were making on the private equity side, as well as people working in consulting that were ultimately leading to decisions that, for instance, they were key members of the teams that were helping Medicare and the government and other acute entities decide which decisions they would ultimately make. And so that was really the light bulb moment. And then that's why I did consulting over the summer. I worked for Bain in the New York office and then the final year took a lot of investing classes just to keep an open mind about all the different paths. And after spending the summer at Bain and after spending more time focused on investing that last year of business school, realized that one of those two paths would ultimately be the one that I would follow. Decided ultimately not to do residency and not to see patients, but it was really just, it all comes back to that fundamental goal.
Post MBA Guest: Kyle Dempsey (06:00):
Right? My goal all along was to bring healthcare to the greatest number of people possible and the path and the track that I had gone on this result of the MBA program, I think has helped to fulfill that objective so far.
Victoria Hefty (06:13):
What made you think consulting instead of finance?
Post MBA Guest: Kyle Dempsey (06:16):
I felt that my background and passion was more aligned with the involved with operations of businesses rather than being involved exclusively on the finance side. And for me personally, I had spent a long time in school between the MD and the MBA undergrad degrees. So although, I was professionally highly qualified, I guess, for a lot of these types of roles, the reality is I didn't have at least at that point in time as much experience of being directly involved with the operations of businesses. And even if I fell over the longterm, that finance would be the right path or investing or any derivative thereof, I did feel like it was important to get some sort of more on the ground exposure, so to speak.
Post MBA Guest: Kyle Dempsey (07:05):
And I felt that you could do that either through an operating role within a company, or you could do that management consulting and my experience did in fact, allow that right. I was able to work on commercial oriented projects and thinking through how sales teams are structured and how they sell their products to doctors in the hospitals, as well as work on the finance department side. So I was involved with a big integration project thinking through how to save costs associated with potential merger. So consultant ultimately around me to do is to get into the functional areas of any given business and learn about that firsthand, which has proved to be very, very important to the work I do now and investing. But that's fundamentally how I thought about it. It's just that I felt that there's sort of few opportunities you can have to get fully engrossed in a business, be really involved on the operation side. And I wanted that experience in consulting.
Victoria Hefty (08:00):
At the time when you were doing consulting, when did PE become a viable option? Was it something that you sort of had in your back mind? I know some people go in thinking that's the exit. Some people that just happened to be on a big, interesting case and that's what tips them over.
Post MBA Guest: Kyle Dempsey (08:15):
The short of it is that I went into it full-time after graduating, knowing that I wouldn't stay forever. I thought that the natural point for me to move to the P sign would be around the time I got promoted to manager. So that typically is kind of around two and a half, three years into a consultant career. So that's how I thought about it. But what actually ended up playing out was about a year into working full time at Bain I had an outreach from a head hunter for the role that I ultimately ended up at is actually the first head hunter outreach I ever responded to.
Post MBA Guest: Kyle Dempsey (08:50):
So I had gotten a lot of imbalance up to that point, but I was actually enjoying consulting in my long-term plan. Again, the idea was to stay for maybe two, three years, something like that. But when I read the description of the role, the head hunter had sent over, I was like, wow, that sounds kind of exactly aligned with the type of private equity I want to go into. And so even though now it's sooner than I had anticipated these roles. They don't always materialize in the timeframe that you want them to be. You have to be somewhat opportunistic. And so when this one popped up and ultimately turned out to be an absolutely excellent fit in terms of my career goals, in terms of finding a really great team to work with. So it's worked out well, but that's, it wasn't necessarily related to any project I was on or anything that was happening at Bain, it was just more functional when the head hunter outreach happened.
Post MBA Guest: Kyle Dempsey (09:41):
So it took a lot of interviews, a lot of dinners, a lot of cases, stuff like that. I think something that's very relevant for anyone who's considering this type of career switch is to really narrow in on the type of investing that you want to do. And I'll go into that in a moment. But I think in this case, the fact that this specific type of investing that this person reached out with was exactly the stage of investing that I wanted to be at. And it was exactly the types of sub-sectors I wanted to be involved with. And I've got a whole framework that I can tell you about that I think will be helpful for you to pass on to other people, but to make a long story short, it didn't require me to convince people because I had already started to think through what type of investing I wanted to do in my background. But at that point in time was sort of perfectly suited for this type of role, because this was the role that I knew I wanted to land in longer term.
Victoria Hefty (10:38):
What do you most frequently get asked about what type of pivot?
Post MBA Guest: Kyle Dempsey (10:42):
Most frequent pivot that comes to me is people who are going down the MD track, many of whom are MD-MDA's. And they're trying to decide whether or not they want to practice medicine work or if they want to pursue an alternative type of career. And then within that, they want to talk about consulting and or investing. I think to this point that I guess I alluded to a moment ago around really narrowing in on what type of investing you want. But if you decide that investing is the right path for you, it's really important early on to think through what type of investing you want to do.
Post MBA Guest: Kyle Dempsey (11:19):
And what I mean by that is that there's different ways to characterize this. You can be a public market investor, meaning you're investing in stocks. So those would be hedge fund type goals, or you can be a private equity investor. And when I say private equity, I'm referring to something that is slightly different than how the word private equity is colloquially used in culture. So private equity just means investing in companies that are not public. So in other words, investing in anything that's not on a stock exchange. Unfortunately, there's a nomenclature issue. Everyone hears private equity they immediately think about leverage buyouts, which I would say is, I don't know why that nomenclature broke down, but I mean, the real definition of private equity is just any equity in Danny private entity. It doesn't have to be a very late stage leveraged buyout, or it could be a seed investment at an angel stage.
Post MBA Guest: Kyle Dempsey (12:14):
So one thing to figure out is, do you want to do public or private investing? What I broadly characterize the difference between the two is kind of as follows. So for people who love solving puzzles, they really tend to gravitate toward public market investing. And the reason that the people that like sort of puzzles do well in that role is that you can't know non-public information when you do public market. So you can only know what's given to you. And in addition to any other sort of market research, you do related to that topic. And so what funnel and mentally trying to do is look at multiple sources of information and triangulate the truth. So management is telling you this thing on a call, you're reading this thing in a market report, this other competitors doing X, Y, and Z. How do you make sense of all those factors?
Post MBA Guest: Kyle Dempsey (13:02):
And once you make sense of them all, what does that mean in terms of your view of how that business will evolve over time? And so coming to that, do you sense it can't involve non-public information really requires putting the pieces of the puzzle together and then making a decision about whether or not you want to buy or sell a stock relating to it for people that let's say really enjoy and find satisfaction in building something. So feeling like they contributed in a meaningful way to actually building a company or building an organization, those types of people, I think probably naturally gravitate more toward the private equity spectrum of investing. And so once you're going down that path of the private equity side, I'd say there's also a spectrum of things to consider. So the very earliest point in private equity is kind of the seed stage investing.
Post MBA Guest: Kyle Dempsey (13:55):
So that's, you oftentimes hear those referred to as angel investors. And then the spectrum goes basically angels to venture capital, to growth equity, and then to leverage buyouts. And that's a really simplistic framework to think about just the scale or the stage of private equity investing that people could focus on. And the backgrounds that are well-suited for each of those different stages is actually very unique and somewhat distinct. So the people who come from financial backgrounds, they worked at an investment bank or something like that. Their backgrounds are really well suited to doing leverage buyout type work, because a lot of the value that you create in the context of a leveraged buyout has to do with how you engineer the capital of that business. So in other words, how much of the business capitalization's coming from debt and how much of it is coming from equity and how are you going to structure that to maximize the value for leveraged buyout people also do a lot with synergies.
Post MBA Guest: Kyle Dempsey (14:54):
So in other words, combining multiple businesses and finding out how to grow revenue or reduce costs. And I think all of those types of questions are analytical, highly analytical, and therefore people with more typical financing type backgrounds would tend to be better suited for those types of roles. Looking at the opposite end of the spectrum, which you're looking at seed stage investing or venture capital. Most of those businesses don't even have revenue yet. And therefore, the people that are best that have the best background under the best tailor for those types of roles of the ones who have differentiated knowledge and ability to evaluate something that's highly technical. And what I mean by that is, so if you're a PhD in immuno-oncology, you'll probably be able to look at some biotech drugs and evaluate just the underlying science based on the experiments and things that people were found today.
Post MBA Guest: Kyle Dempsey (15:47):
And that will help you to handicap the probability about whether or not that drug will ultimately work. If it's a tech idea, if you're a computer engineer or programer or something like that, you might look at the code associated with that product to give you a sense of how differentiated it is relative to what other people might be doing. So for those early stages of investing, what really dictates whether or not things go well for that investment really relates to a deep dive into the technical aspects of it. And so people with highly technical backgrounds tend to do better in those roles. And the thing that's in between leveraged buyout on one extreme, and these earlier stage opportunities on the other, is growth equity. So growth equity, I have a business now that has some revenue, it's got a business model, but there's still being maybe some questions about is this product, the optimal product, how is it going to compare relative to competition?
Post MBA Guest: Kyle Dempsey (16:42):
How can the business model be improved to allow it to scale faster seeing, can you change something about the manufacturing to improve the gross margins? For instance, Kenny change the way that Salesforce is structured to allow them to sell more efficiently and sell faster and to expand the footprint more quickly. So what I would say is the person who fits perfectly into the growth equity is kind of a hybrid of, they need to be able to look at the underlying product and say, does this thing actually work as it's anticipated to work? Will it withstand competitive pressures over time? And on the other hand, ultimately in some amount of financial background and skills, because a lot of what you're trying to decide is how fast to grow. And that ultimately becomes a question of how much money will this burn grow to a certain rate.
Post MBA Guest: Kyle Dempsey (17:31):
And so that people that fit best in the growth equity role are the ones who have some business background and some technical background. And so going back to this original question of why did, did I have to convince anyone when I was interviewing for this role? The answer was no, not really. Because my background in science and medicine was kind of perfect for doing the initial product evaluation there does this thing work, do I believe in it? And then the Bain and the MBA toolkit brought some of those financial skills and some of those operational skills that are required to help these types of businesses grow. So for me, personally, growth equity was exactly where I wanted to end up in my background was exactly tailored to that skillset that was needed to land there. There's almost like two parts to this. And people decided to go down private equity.
Post MBA Guest: Kyle Dempsey (18:18):
There's a skillset well-suited to, and that skill set question is what I kind of just laid out. But then there's the broader question I think of philosophically where you want to end up in what brings you to me for me, the idea that I would be involved with companies that I thought were changing the way healthcare is delivered, helping it to be delivered in a more cost efficient way, or to bring therapies to people who don't currently have them because the therapies didn't exist prior to these companies, the idea that I'm going to help those businesses grow and help people get more access to those types of businesses, I think is something that's highly rewarding. And when I'm sitting in my sixties, looking back on my career, if I can say, well, I helped a bunch of those businesses to grow. And I touched millions of patients in the process.
Post MBA Guest: Kyle Dempsey (19:05):
Then that's a huge, philosophically, that's exactly where I want to be. Other people may feel more affinity to being involved with really large businesses because they find it very rewarding to be involved with something that's going to show up in the wall street journal. For instance, if you're working at a very large leverage buyout company, you may do transactions that are going to be all through the news and people, a lot of people find that highly rewarding. And on the earlier stage, a lot of people just find it really rewarding to work with entrepreneurs and inventors, and to help them think through how they can bring this idea that could be transformative, how to actually operationalize that, make that into a product that's actually viable. And so I think there's two layers for the people that decided to private equity is the place that they want to go later.
Post MBA Guest: Kyle Dempsey (19:50):
One is philosophically, where do you think you want to sit on that spectrum? Just based on what do you find philosophically rewarding? You can tell him. And then the other more practical question, which is what you're getting at, which is how you actually land the job was a function of, do you have the right skills to land in that piece of private equity that you're targeting? And the biggest challenge I think that I consistently see is that there's an asymmetry between what people want and what their skillset is. So if you want to be a venture capitalist that you took economics courses, your whole life, maybe you don't have a super technical background. So it's going to be hard for you to differentiate yourself at the venture capital stage because you just don't have the, or at least a lot of people have that. So what you would do there is you'd have to go and automate your education, get some sort of sector expertise that can allow you to be differentiated in some way.
Post MBA Guest: Kyle Dempsey (20:42):
Conversely, if what you've done is worked in labs, your whole life, going after a leveraged buyout type opportunity is probably not going to work because it's going to be an asymmetry between the financial skills, the Excel, the actual hard skills that you need being an Excel expert to do that well, and that person's background. And so when those asymmetries exist, you're paddling against a current that is high on the competitive current, and that it's going to be very difficult to break through. Once you figure out where you want to land? It was need to make sure you take a series of steps that allow you to build up the background you need to do well. And then it's no longer about cold outreach and networking to hire people, which is most people's approach. And instead becomes a question that you are someone who has almost tailored your career to land at this spot, and it will greatly increase your odds of ultimately landing a role.
Victoria Hefty (21:36):
I love a good framework that makes my life so much easier. Thank you for that. I can even see the slide right now. The second part that I love that you said, so a series of steps that you can take, right. Instead of just going after these headhunters and trying to make up sort of this background in a way, if I could probe a little bit more. So using an example, you can use any example, what would be a series of steps for someone? I don't know, maybe we can use me or someone you know, that was interested in, we can either use growth equity, LBO, or the early stage, but didn't necessarily have something they'd needed to close a gap. What steps would you recommend? We can break them into either three or four, where either you saw that there were now qualified or could help them position themselves as being qualified.
Post MBA Guest: Kyle Dempsey (22:21):
Yeah, I think there's a couple that immediately come to mind that are consistently be remedied to improve someone's chance at landing a role like this. So the biggest one would be someone who has a traditional consulting or investment banking background and that lacks, the technical skills or expertise. What I would say there is the way you can remedy that situation is to either go back, do a master's program or something like that and whatever area it is that that is of interest to you, the other way to do it is to go take on an operational role.
Post MBA Guest: Kyle Dempsey (22:53):
So like, let's say that you've worked in investment banking. Clearly you have good finance skills at that point, but maybe you've never had exposure to pharma or to medical devices or whatever it is that you're interested in. So the natural thing to do there is go and take a finance role at a pharma company med device company. And now you're starting to build out some industry specific skillset and knowledge. So what you've done is you've leveraged your finance background and it's helped you to land a role, but now you've sort of, you've only made one step pivoting to things rather than trying to pivot from your functional areas, as well as the industry concurrently, you're staying in your functional area and you're just pivoting on the industry.
Post MBA Guest: Kyle Dempsey (23:35):
So that would be one way to fill that. So those are the ways that you fundamentally would fill the technical expertise gap. We either go back, do a formal program, just try to get an operational role in that industry. The other one I often see is almost like the opposite problem. So it's someone who comes from a highly technical background. Maybe they did a PhD or an MD blitz, and they did an AI focused PhD or something like that. They're very deep in that space. That truly are the subject experts, but with those people typically lack are the, lets say the basic tools of business, which in my mind, those are PowerPoint and Excel. The way that you build those skills as you go to a place that has a highly structured program to train people on those specific things. And I think the two most obvious paths in my line is to go either to the consultant firm a management consulting firm or to an investment bank.
Post MBA Guest: Kyle Dempsey (24:35):
And if you go to any of the established banks or consulting firms, those businesses are in the business of human capital. So they train everyone who comes in, they send you away on retreats to train you, to use Excel and to use PowerPoint. And then they have ongoing feedback and mentorship. So there's this apprenticeship model that's built into each of those that will ensure that you get an expert level of skill in both of those areas. And so if you go and you just do banking or consulting for a year or two, you'll have all the Excel and PowerPoint skills you'll ever need. And then you'll also have the subject expertise from the prior work that you did. So that's kind of the easiest way to remedy that.
Victoria Hefty (25:15):
No, that's perfect. So when you think about the people that you've seen, if you had to say one or two qualities of people that end up thriving, well, we'll focus in growth equity sort of year-round end up truly thriving. Like, yes, there's an element of working hard and long hours and all of that, but ultimately, when you see people and they just love what they do, what are the traits of a couple of people that seem to truly be thriving in this role?
Post MBA Guest: Kyle Dempsey (25:39):
Two thoughts there, I guess one would be a natural curiosity for how things work. So it really interesting thing about most of these investing roles is that even if you're investing in a specific sector, let's say industrials or healthcare, every business you see is just so distinct and so different. So even though they're in the same sector, the issue they're addressing the way they're addressing, the business models, behind all of those, they're all so distinct and so different that if you're someone who naturally enjoys learning, these jobs are phenomenal because every new opportunity you evaluate, you learn something new about.
Post MBA Guest: Kyle Dempsey (26:15):
And so the people that I've seen that do well are the ones that just gravitate toward, I guess, having a level of curiosity that makes that type of cadence of constantly learning new things. If that's appealing to someone that I think they don't tend to burn out, because at the end of the day, there is a lot of work in private equity, right. But if what you're doing is intrinsically interesting to you either because you philosophically agree with the type of investing you're doing, or you just have natural level of curiosity. I think those two things would play in well. The other thing I'd say when I reflect on people who've have done really well and investing, I think there's a lot to say about I'll use the word grit, perseverance, and that manifests itself in a lot of different ways. But I think the reason those characteristics tend to shine in this industry is that a lot of the things you work on and that you dedicate substantial time and effort to ultimately won't work out.
Post MBA Guest: Kyle Dempsey (27:16):
So the reality of this is that when you see, and you do a lot of work on a lot of companies that don't end up playing out for various reasons, and I think the grit and the perseverance comes in knowing full well, that despite the fact that it's going to be a low profitability, that something's going to go through, you've got to, when something doesn't work out, you've got to be able to sort of recollect yourself, get excited about a new opportunity and keep moving and keep pushing it forward. So I think that grit and perseverance comes in there just in terms of what's needed on the sort of day to day business. The other thing I would say is that depending on the type of investing, you're doing, the people you work with from the companies, they themselves demonstrate a lot of perseverance. And they tend to like people who like to work in those types of environments.
Post MBA Guest: Kyle Dempsey (28:03):
And what I mean by that is, especially if you're on the venture stage or the growth equity stage, a lot of these businesses are still actively trying to prove themselves and their paths and never going to be perfectly linear. It's always the case that these businesses oftentimes take two steps back and then they take three steps forward and I take a step back. So it's never perfectly up and to the right, it's more like peak truck peak truck. And if the people involved or the product is good and the people involved are very perseverant, the trend will be upward over time. And so, because of the people you're working with at your portfolio companies naturally have to be perseverant themselves. It's almost like a good characteristic for the investor themselves to have because going into it, knowing full well that no investment that goes perfectly on that.
Post MBA Guest: Kyle Dempsey (28:54):
You're going to expect those ups and downs. I think the personality type that is just naturally perseverant is going to be able to help those management teams through those difficult times. And I think as an investor, that's ultimately one of the most desirable characteristics. I would think if you were a CEO or you were at another executive at any company that was considering taking an investment from an investor, you want to be working with people that are just like you, perseverant and able to push them on situations. So, yeah, I think those are the main characteristics.
Victoria Hefty (29:28):
Thank you for listening to this episode. If you are interested in crafting your next career move or reading the transcript of the conversation, please visit post MBA, pivot.com. Finally, if you enjoyed today's discussion, make sure to leave a review and subscribe to receive the next episode.
