Stephen Schwarzman: Experience, Connections Key To Fund Launch

Stephen Schwarzman: Experience, Connections Key To Fund Launch

Stephen Schwarzman says trying to set up your own shop in the finance industry too early is a big mistake

Apparently it’s not easy being a private equity billionaire, at least according to Blackstone co-founder Steven Schwarzman. Schwarzman, the multi-billionaire co-founder of alternative assets industry leader the Blackstone Group, spoke at the Harvard Business School on Sunday, February 1st.

Pay your dues and avoid temptation

A February 2nd article in the New York Times noted that Stephen Schwarzman told the students to avoid the temptation of starting a new firm given the considerable risk of failure and the very negative consequences of failure. He also referred to finance as an “apprentice business,” and commented that any “would-be entrepreneurs” must have years of training, and just as important, be bringing something innovative to the industry.

“This is not Silicon Valley, where failure is an option,” Schwarzman highlighted.

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The warning from Stephen Schwarzman might carry extra weight as he is considered by many Wall Streeters as the ultimate finance entrepreneur, becoming a billionaire as he was deeply involved in launching the business of private equity. Blackstone is the largest alternative asset firm worldwide, with $290.4 billion under management currently.

Stephen Schwarzman says don’t damage your career

“The biggest mistake I’ve seen people make with their careers is, when they’re good, after two or three years — and they happen to be smart — they announce that they’re going out to start their own firm,” Schwarzman said. “I have begged, literally begged — I’ve had people come over to my house on Saturday — and begged them not to do that, because they’re going to destroy their careers, because they’re not old enough yet, they can’t raise enough money yet, they don’t have enough credibility.”

Stephen Schwarzman continued to say: “And they sort of look at me and think I’m trying to discourage them so they’ll stay at Blackstone. That’s actually not the case. If somebody really wants to go out on their own, they’re going to go anyhow. But the question is, when is the right moment, when do they have the right skills?”

He concludes on a cautionary note: “Every person who’s made that decision, in my view, has failed,” Stephen Schwarzman said. “Every one of them.”

The perils of a “me-too” business

“Doing a me-too business, because it’s you — the only person who cares about that is you,” he said. “The market doesn’t care if it’s you. The market is pretty much being served. You better have something that the world doesn’t have, because even then you might screw it up through your own ineptitude and inexperience.”

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