Transition between Venture Capital and Merchant Banking?

Refreshing Thread

Merchant banking has too wide of a definition to really say what the transition entails. Although I haven't spoken to them in a couple of years and I know post regs they may have changed, GS Merchant Banking was basically their in house PE arm and did some of the biggest deals out there (I think, but someone correct me if I'm wrong, the MB division was in on the TXU deal). On the other extreme there are small firms that call themselves merchant banks who are more or less fundless sponsors who put deals together, maybe throw a small amount of equity in or cover some of the upfront diligence and deal costs and try to get an outsized piece of the action upon acquisition. You can also have merchant banking firms who would fall into the latter of my definitions but have some serious swag and money behind them like Three Oceans. I'm using US definitions because I know in the UK merchant banking is used as an equivalent to PE.

VC is also too varied to say how hard it would be to break into MB. If you have a top institutional sized VC on your resume like a KP or Sequoia, it may not be that hard. If it's a $20MM friends and family fund that no one's heard of it may be more difficult. The skill sets are different but as an intern it's not as if you've got 15 years under your belt and it would be difficult to develop the necessary skills to do private equity style investing. Now it may be difficult to get into the buyside because the more traditional path is IB to buyside, but that's another story.

As for the stability, it all depends on the fund. For example in VC at a KP or Sequoia, I'd suspect the funds aren't going under anytime soon and stability, for all it's worth in the general world of finance, would be pretty high. In merchant banking (or just to use a pure PE firm for name recognition) Blackstone would be pretty stable in my mind. But GS Merchant Banking in 06 would have seemed as stable as they come but due to Dodd-Frank and Volcker, and a few losing bets I think they were hugely pulling back on that division in general. A small VC firm run by a successful entrepreneur may be less stable because he may be primarily investing his own money and if he decides to stop investing it for any reason (he runs out of money or he decides he'd like to take up tango dancing and become an instructor in Argentina) or it could be the most stable of all because he may be an entrepreneur who made $1B on an exit and he'll fund his VC fund forever.

Stability in finance in general and especially on the buy-side is largely defined by personal performance, especially as you reach the higher levels. You could be at the largest funds in the world where they're raising billions annually but if you suck, there will be no stability. If you want stability become an accountant.