What it really takes to quit investment banking for Silicon Valley

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Investment banking isn’t what it used to be. The pay is good but not great, and the prestige has gone. Tech firms and start-ups are the new belles of the ball.  But will you fit in at the start-up party?

“It’s a culture shock for most bankers,” says Andrew White, CEO of fintech start-up FundApps. “We have one fixed meeting a week, all other planning is done on the fly and is largely self-controlled. There is no line manager telling you what to do. The "just do it" mentality is a shock for some. We say ask for forgiveness, not for permission.”

Contrary to expectation, the hours in a start-up can be just as brutal as in investment banking. And in an important sense, working conditions are worse – there’s no supportive peer group. Matt Lombardi, ex-banker and founder of sports website CollegeSpun, says he worked for hours alone in his "man cave" to get the business up and running.

Steve Wu joined Moelis & Co as an investment banking analyst in July 2013. He completed finance internships, headed up the business society at UCLA and beat hundreds of applicants to a handful of jobs. Less than a year later, however, he quit and decided to join mobile games firm Scopely as a product manager.

Wu says investment banking equips you with the skills necessary to survive at a tech start up.  After time in banking you have an ability to analyse large sets of data, think critically and solve problems. You also have the ever-important “strong communication skills” that will get you ahead. White says that bankers bring organisational abilities that are rarely seen in the typical start-up hires.

If you’re a banker who’s thinking of shifting to a start-up, you’ll need to accept a pay cut. The average salary for a tech start-up founder in London is £35k, according to Tech City News. This is less than the basic salary of a first year analyst (£40k), which is also supplemented by £27k bonus. In Silicon Valley, this averages out at $140k for a male graduate with a Bachelors degree, while base salaries start at $85k on Wall Street for first year analysts.

Lower pay is mitigated by other benefits, however. Former bankers who’ve quit for start-ups say the move reinvigorated their interest in work.   “It wasn't long after I started working full-time that I realized I wasn't interested in doing finance for the rest of my life,” says Wu. “It was ultimately a decision based on my interests and passions, and investment banking helped me discover that finance was not one of them.”

Young bankers are ushered through training programmes and given clearly defined duties. Going into a start-up is a different proposition. “Our CTO still helps in design matters, our engineers do client support and our client services people have learned lots of technical skills,” says White.

Wu says that he spoke to former bankers who went into start-ups, shifted into private equity or simply took an MBA to get guidance, believing that once he left it would be incredibly difficult to get back again. Ultimately, however, everyone had their own motivations.

“Investment banking is a proven path to a successful, stable and wealthy career and it makes sense that people would strive for this goal,” he says. “If you love finance and working in investment banking then you've found your dream job. If your happiness is directly tied to having a lot of wealth then a path in finance could make sense. But if you ultimately want to optimize for having an impact or pursuing something non-finance related than there's no point in continuing through the finance funnel since the deeper you get, the harder it is to leave.”


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