With analyst bonuses paid, private equity hiring is now going full throttle, but not everyone leaving banking agrees that joining a private equity firm is a good idea.
Will Lundy and Fabio Fenton left their jobs at Torch Partners, the technology-focused boutique investment bank, in December 2020 and June 2021 respectively. The two former associates have set up Ithaca Digital, a platform to enable assembly of collaborative teams of freelancers.
“I interviewed for jobs in private equity," says Lundy. "But if you look at how the market falls out at the moment it makes far more sense to me to try and create a company.”
Bloomberg reports that funds are sitting on $3.3 trillion of unspent capital including $1 trillion held by buyout funds, which have significant dry powder. "There is a huge amount of money being raised by private equity firms, all targeting a limited pool of assets," says Lundy. "This has implications for the returns that they can generate. Large sums have also been raised by the venture capital industry and this provides an excellent opportunity for founders right now.”
Lundy and Fenton came up with the idea for Ithaca Digital during the hiatus in the early stages of the pandemic – before deal-making activity went wild. “We found ourselves with a bit of time during lockdown and we started thinking about the labour market,” said Fenton. “You have skills shortages and businesses struggling to attract people, and you also have people looking for flexibility in their roles. We looked at existing freelance sites and found that they didn’t provide an opportunity for freelancers to collaborate across teams.”
Their intention is that instead of hiring fulltime employees to fulfill some functions, client businesses will be able to assemble flexible teams on the Ithaca site. “We see the potential for a new model of work,” says Lundy.
Lundy is aged 31 and Fenton is 30. "If you’re going to pursue an entrepreneurial venture, this is a good age to do it.," says Fenton. "We don’t have any major financial obligations and we have leeway to take a risk" Along with friends and family, the two have invested their own money in Ithaca and plan to look for angel investors at the end of this year when their prototype is operational.
“At our stage we are certainly living with less money than we did in banking, and you have to manage your finances carefully," says Lundy of life outside banking. "But you also live with a lot more freedom on how you pursue your objectives and spend your time. In banking, you’re often so busy working that you don’t have time to think creatively.”
Lundy spent three years as an analyst at Credit Suisse between 2016 and 2019. “Over that time there was very significant attrition, as is often the case in bulge bracket investment banking, and almost everyone I started with has now left the bank," he says. "Most people left for private equity, but a few left for entrepreneurial ventures.”
Neither regrets missing out on the probably generous 2021 banking bonus round. “Receiving a banking-sized bonus is exciting, but creating a company in which you own equity and can shape direction is, to me, much more attractive."
Photo by Muhamad Rizal Firmansyah on Unsplash
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