Top ranked banking and consulting juniors are more mobile and in demand than ever. While Private Equity remains a very desirable exit point, we are seeing increased competition in Germany from the start-up world.
Junior candidates are more networked, informed and international than ever before. Well removed from any economic crisis in their lifetime, it may be a false sense of security or belief that seductively high salaries are here to stay. But driven by a greater need for self-fulfilment and social purpose in their work they often leave their homes at top tier banks or strategy consultancies to pursue a start-up. It is almost becoming a rite of passage for ambitious and entrepreneurial high potentials to found their own company or join a start-up.
The start-up culture caters to Generation Y in many respects; it affords them greater responsibility and authority from an early stage, working with cutting edge ideas or technologies, and often with products that have a higher social or moral purpose.
The market factors nurturing the start-up boom in Germany are numerous – investors seeking alternatives due to low interest rates, Government support to build Berlin into the start-up centre of Europe and the lower cost of living in Berlin attractive to first time founders living on a shoe string.
The success of Rocket Internet (now a household name) has further improved the status of the start-up sector in Germany (and abroad), and their ability to attract high calibre recruits. Rocket attracts a notably high number of McKinsey alumni to their start-ups throughout Asia, for example.
What does this mean for PE funds?
While this start-up experience may delay the initial availability of many strong candidates, we don’t regard it as a permanent hindrance. We are witnessing many wishing to return to a more established and stable work environment after just 1-2 years, where they can put their operational and commercial learnings to good use.
They bring with them a strong understanding of e-commerce and digitalisation strategies, first-hand operational exposure as well as a keen entrepreneurial spirit. This represents a great opportunity for Private Equity funds willing to harness and benefit from these candidates.
A number of PE funds have already discovered these Start-up graduates. In the spirit of “nothing ventured, nothing gained”, the learnings are still recognised even where the start-up business has not been continued. For Private Equity firms it is however imperative that the candidates have a formal base training with a top tier bank or consulting firm before entering the start-up world. That said, many may need to adjust or flex their traditional hiring profiles if they wish to capture the best candidates in today’s workplace.
It is clear to all that the market is at a high which will have to slow down in the near future. So it remains to be seen how the start-up world will react when an economic crisis hits, and in turn how this will affect candidate behaviour. Will they become more risk adverse, choosing the security of a bank or consulting firm over start-up. Or is this a sign of the new generation that is here to stay?
