When would you find the opportunity cost of going into investment banking to be too high?
In short, I've been growing my tech startup which has jumped from a 400k valuation up to 1.6mm+ valuation in the past month (according to the rounds we've raised), and we have a decent amount of momentum. Good team, good network, good market timing, and at this point I'm pretty torn. But of course, this venture is very risky.
So yeah, ideas? Perspectives?
If this blew up in my face, would it be hard to break back into banking? (I have past tech m&a internships and a corp fin/dev internship, if that's relevant. I am also still in college.)
Looking forward to hearing from you guys. I have good opportunities in front of me and I know I'm really fortunate, but I guess I'm worried about burning bridges in the next couple months.
BankingWaffle
Dude, you have a 1.6mm valuation. Don't leave to go work on something you don't care about for 110 hours a week.
Stick with your goal. If you can manage to sell out and make $5mm down the road, great, if not, it will be an incredibly story for both interviews and B-School.
You'll be fine.
How much of that $1.6M is your stake, and is it bigger than "your number"?
With that under your belt you've always got B-School. Stick with the start up for now.
If OP's stake is 10% of 1.6M, it's not quite big enough to be worth it, yet.
If it's 30, 40, 50% of 1.6M, and it's something OP truly believes in, it's probably worth it.
If it's bigger than OP's quit number, it's definitely worth it.
Tentatively 26%, but i expect with dilution from VCs in the long run 13%. If we can grow as lean as I'm hoping, maybe 18%ish.
And of course, I believe in my business blah blah, but then, no entrepreneur can really do it without believing in it. I guess the biggest thing is I love doing this stuff. Not to say I don't enjoy banking--besides stupid formatting stuff, I actually enjoy models, meeting clients, and building pitchbooks.
So yeah, I'm not sure what my quit number is really. I was wondering, if you were in my shoes, what would be your hypothetical quit numbers I guess? And why?
It would be based on where I grew up and/or where I spent a lot of time seeing people like me who were happy, and how much it cost them to live.
Going to school in Champaign-Urbana, IL you needed a $75K house, health insurance ($150-200K for a single person for life), and $25K/year of non-housing income to be happy (multiply by 25 to get a sustainable income). So my number as a college Senior was about 800-900K.
How do you plan to get health insurance after you graduate?
Is the business generating net revenues? Or are you losing money after paying for advertising, web hosting, and other stuff before paying folks? And what is the business's potential? $20M valuation? $200M valuation?
The risk-reward with going into banking is a 50% chance of having $1 million inflation-adjusted after ten years of work, and the 95th% worst case is general employability as a white collar professional in a different industry.
Don't really mean to soil your dream dude but the fact you are asking people to choose for you which path to follow tells me you are better sticking to monkeying. Most successful entrepreneurs didn't start theirs as a material means to an end. I believe even the Google project started off a digital library cataloging. It was initially meant to simplify a process before they saw a bigger opportunity in it. Anyways good luck with whatever path you decide to follow.
10MM is enough to walk away from anything.
I'd sell your stake in the company. You will be able to lock in around 500k, and then can invest that. Then do a banking job and invest majority of your salary. You will be able to retire on interest income around 45 years. Bam! Then go to mexico where it is mad cheap and just enjoy the pina coladas.
When you realize you have another gear.
You're an entrepreneur mang, don't even think about going into banking.
Just hang out in the right parts of NY, San Fran, London, HK...the list goes on, meet some peeps and you''ll be floating dawg
Bankingwaffle re-read your post and without sounding too utopian why don't you ask yourself and depending on how old you are how much realistically you can get out of this if you were to leave banking now. Illiprog has put it correctly in the ball park median figure. If according to your tentative 3-5 yrs futuristic value is around 500k and if I were you I'd quit banking and stick to what I like and know best.
interested.
I've been down this path. A few patent lawsuits, and all of a sudden turn a 100M payday turns into a "maybe I'll get 1% of what I think I am worth 5 years from now". It's not fun.
Until you are cashing checks into your personal bank account...valuations mean NOTHING.
Hell, I started a new start up a few months ago, I got a million dollar valuation from my first two investors...how much money have I seen? Zero.
It's all a matter of scalability. If you model it out and the low probability event of your startup "making-it" is just to have a custom apron business that ultimately cashflows a few $k, then I wouldn't do it (or better yet, try to do it on the side or after banking). However, if that same low probability event of "making-it" is with some disruptive B2B or P2P platform that lights the goddamn world on fire, then I'd give it much heavier consideration.
(I'd like to think I'd take the risk in that second scenario, but it's hard to say.)
Sounds like it's too early to make a drastic decision.
I would probably stick with the venture under most scenarios just because of the opportunities/experience. I tend to place a lot of value on experiences.
A few things to consider:
Does this start-up have anything to do with music? If so, I know who you are and would like to speak with you (no homo).
I'd say go for it if you actually believe you can make a living doing it and enjoy it. There's always B-school yada yada yada...but fuck that...make it work.
Thanks for that point. Luckily my sector isn't big on IP trolling, but the competition is still fierce, so I need to reconsider exactly the odds of walking away cleanly.
That's the thing. I realistically think my start-up is a Hail Mary--I walk out with 0 or a cool minimum of at least 5mm at the end of the next three - five years. The "safe" valuation I think I could probably sell off at would be 4 - 5 mm in a little more than a year from now. But again, odds statistically speaking are never in my favor...
Lmfao. 8/10.Nope. And lawl.
I really think my "dream" job would be working VC ranging all the way from seed - growth equity side, and jumping in full-time to any company I saw enormous potential in. So this venture and tech banking can both to an extent guide me towards this path.
Swimmingly. 200mm+ valuation by 2015, I own around 13%. High. 100mm valuation by 2015, I own around 13%. Likely. 20mm valuation by 2015, I own around 18%. Low. 0 and a story. I own 26%.
And salary wise, it depends on the coming year's performance, but I also have an options plan and am tentatively planning salary-wise for $50k/yr until 2013/14, and then $100k/yr onward.
Dude are you kidding? Go for it. In ten, twenty, thirty+ plus years I guarantee you would much more regret having to think about what could have been with your startup then with a career in banking. Remember that Victoria's Secret guy from the Social Network? You don't want to be that guy.
Lets assume you make it in either scenario. If you "make it" in banking you're an MD or PE partner making $800K-$1mil living a nice lifestyle as part of a huge firm. If you "make it" with your company, you could have $100 mil, be your own boss, a well known name in the industry, and generally just control your life to an extent that you never would be able to in finance.
And of course, likely / high is in the context of "entrepreneurship" odds. I'd be an idiot if I was cocky enough to believe I was really that inherently special compared to many other entrepreneurs. I guess context on where I fall in the entrepreneurial landscape is that I'm good enough to receive offers to a few top accelerators (not ycomb/techstars though, it was too late for me to apply for the summer round--but quite frankly, I don't want to give up 5-12% of my business for a network i can easily develop on my own) and we managed to secure the angel independently because he likes our tech. If that means anything.
Dude, f banking.
20MM by 2015? Even if you fail miserably you still have the resume and experience which will probably be better for B school apps.
Stick with the startup. You can always do your analyst years one, two, three years down the line if it doesnt work out. But if it does...
Not to be pessismistic, but does your company have a product or any sort of earnings yet? I know lots of people who throw around these sort of $1+ mm valuations where their product isn't proven yet, they have no revenue to speak of, and no forecasted earnings. If that is the case, I wouldn't give up on banking yet...
Market validated product, fine tuning our release, but it can be a hit or miss admittedly (feeling pretty good about the hit part though). We have revenues from semi-relevant projects of $100k, and we're close to landing a $10mm 2yr contract (and this is excluding our own internal main project, which we think can crush in the market).
BankingWaffle going by your last post dude I seriously recommend following your heart on this one. Like others said you can always come back to Monkeying or find another inspiration if it goes bust. Good luck.
Alright. I think I know where I should go with this. I guess my next question is, given my background (tech m&a, corp fin/dev internships) would it be hard to break back into banking after running with this (assuming i don't just do another startup)?
Tech m&a definitely. You should also look into Tech VC and even a gig at at silicon valley shops. Plenty of leeway for you there especially & the 'operative' word here is especially given you left tech m&a to join the bonobos wearing tech mafias.
Whatever you do do update us and have a pleasant weekend.
I didn't even know bonobos wearing was a stereotype, but given that I'm wearing a pair of GTH pink bonobos pants, stereotype eerily confirmed, haha. And will do as I continue to forge ahead. Thanks a lot for the perspectives guys!
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