Last summer, when ‘juniorisation’ in investment banking was merely a germ of an idea, Chris White, a managing director at Goldman Sachs, left to start his own capital markets consultancy.
A year later, and investment banks have continued to cut back on senior employees, many of whom are flooding the market without a good chance of finding a similar role. Going it alone is increasingly a favoured option.
“I’ve had former Goldman Sachs managing directors approach me on the beach while I was on vacation for advice,” says White. “Those at a certain level of seniority in banking are deemed too expensive and are being targeted as banks get leaner. People who’d imagined themselves as leaders of the future are being replaced by those with less experience and who are cheaper.”
Breaking the banking mindset
White spent 18 years in investment banking and six years working for Goldman Sachs, latterly heading up its electronic bond trading platform GSessions. The bank later shelved this, before reviving its move into electronifying bond trading earlier this year with Goldman Sachs Algorithm (GSA).
“The first thing you have to get over is how institutionalised you’ve become,” he says. “No matter how committed you are to your job, running your own business will always be a bigger commitment. It’s like the difference between baby sitting and looking after your own child.”
His new firm ViableMkts is comprised of 12 former senior electronic trading professionals who work with banks, buy-side firms and vendors to help with their technology and innovation needs.
“I am much happier. I realised the other day that I don’t have that feeling of anxiety in the pit of my stomach that comes from working in investment banking,” said White. “Now, I can just concentrate on the work. I’m not trying to convince others to modernise the business. I’m not trying to push innovative ideas that are facing a lot of resistance. This is where the stress comes from.”
White says by the time his team are taken on, the company concerned are “committed to innovating”, so they can concentrate on what needs to be done without battling internal politics. “We’re like a special forces team that can help their process,” he says.
How to make your company work
A year into entrepreneurship and White has adjusted to life outside of an investment bank. He has some advice for those looking to do the same.
“Never get too high or too low,” he says. “You'll have some great successes and some magnificent failures. The key for developing your own business is not to dwell on either."
Many senior employees emerging from investment banks have great experience and deep domain expertise, but one of the reasons people are being shown the door is because they lack an understanding of the new, electronified market. Starting your own firm straight after this is not always wise, says White.
“Some people coming from investment banking are trying to immediately start their own business, but their skills and experience do not necessarily translate well to financial technology entrepreneurship,” he says. “In those cases, an interim step may be very helpful. For example, I’ve seen a very successful high yield sales person take a sales role in a start up high yield trading platform. Now he is a double threat because he understands the market and market systems.”
The other problem is funding. It’s easy for former Wall Street professionals who have been earning six- or seven-figure salaries for years to use their own funds to get the business off the ground. Stu Taylor, CEO of fintech firm Algomi, told us that he used his own money to support the business until revenues started coming in – and then sought VC funding from a position of power.
White thinks otherwise.
“Using personal capital to get your business off the ground is too easy,” he said. “Raising capital is a lesson in being an entrepreneur. Your pitch can be crushed, but this gives you the motivation to develop the idea into something that will really work. It’s all a learning process.”
This applies to the people you should take on – often the biggest challenge for any start-up. Starting a new firm gives you an opportunity to shape its culture and often this means ripping up the rule book for what you’d encounter in a bank, says White.
“Part of the criteria for joining ViableMkts is that the person has to have dedicated a part of their career to innovation,” he says. “At some point, they’ve probably failed, but this means they have acquired the necessary validated learning to help other innovators figure out what works.”