Interview With Arden Reed Co-Founder Carlos Solorio

A few weeks ago I had the pleasure of getting to know wso/">Carlos Solorio, a former investment banker who came out of the Lehman Brothers meltdown in 2008 unscathed, was an Analyst in the Latin American coverage group at Barclay's, and is now an entrepreneur who co-founded the custom business attire company wso/">Arden Reed.

Check out my interview with Carlos to learn more about his experiences at Lehman and Barclay's and why he decided to pursue entrepreneurship instead of the more "typical" post-IBD paths that all you monkeys seem to be so obsessed with.

Q: The question everyone knew was coming: tell me more about your story. How did you get started in banking? Specifically, how did you get started in the Latin American coverage group?

A: Sure, I actually interned with Lehman Brothers back in 2008 in the industrials group, ended up getting an offer but, as you know, between 2008 and 2009 Lehman Brothers went bankrupt. So for about a week there I was without a job, though Barclay's handled it well and got back to us within a week and offered us the positions again. At the time, Barclay's had a different procedure for placing Analysts into groups – we would rotate through 5 different groups and would from there vote on which group we liked best, and the group heads would also vote on who they wanted most. I wasn't crazy about Industrials because I had a rough idea of where the US market was heading, and since I was fluent in Spanish, I specified to them that I was interested in joining the Latin American coverage group – a group that was growing pretty aggressively compared to others – and I got picked.

Q: You spent one summer at Lehman, the return offer went under a few months later – what was going through your mind when it was unclear that you'd have a job the following year?

A: It was pretty scary to be honest. I hadn't interviewed anywhere else, had accepted my offer, and really didn't have a plan B. On the bright side, I was graduating in 3 years, so I had the option of staying in college and waiting it out. I picked up a few interviews during that week, I think JP Morgan and a few other firms started approaching some of the Lehman interns, but at that point I really had no idea of how everything was going to play out.

Q: We interviewed a guy who was in S&T at Lehman a few weeks ago, and he had a lot to say about the culture – how cutthroat and brutal it could be. Was the culture aggressive or antagonistic in investment banking?

A: From my point of view, the Industrials group was very fraternal. Lots of former football players…I wouldn't say the culture was overly-aggressive, though that could be true for S&T. It was a very fraternal environment and I wouldn't describe it as too aggressive with people trying to put each other down to get ahead.

Q: Why don't we talk a little bit about how in the LatAm coverage group the work might have differed from what people who focus on the US do? I know in another article you mentioned that calculating WACC is different – instability or emerging market premium, etc. Are there any other things you'd point to that are different in terms of valuation in a LatAm coverage group?

A: Sure, for instance there aren't many well-researched industries. So for example, in our comps, a lot of the times we wouldn't have extremely accurate figures, since many of the companies that would be used as comps were private. We'd often have to use metrics that weren't based on EBITDA – like counting the number of stores and square footage per store in a retail environment for example. In one oil transaction I worked on, the structure was entirely different from what a "typical" oil deal would look like – I can't say much more on that, but I will say that dramatically different deal structures are common in Latin America. Each country has its own rules. Brazil, for example, has a history of not being too fair to minority shareholders. In Brazil, you can purchase a company without necessarily buying out its preferred stock, essentially forcing the core minority shareholders to sell or just sit on the illiquid securities. That's just one example of the regulations we had to face, but each country has its own rules. It definitely got complicated.

Q: Would you say that the deal sizes were smaller than what you'd see in the US?

A: It depends, we tried to stick to $200MM+. One of the deals I closed was the largest in 2011 at $42.5BN, so it tends to run the gamut. During 2011, 6 or so of the top 20 deals came from Latin America. What you have in the US is more incumbent players purchasing each other, whereas in Latin America you have continued consolidation, which means these deals tend to get bigger and bigger over time.

Q: Every so often, questions about "breaking in" to LatAm coverage groups pop up on WSO. Is there any advice you'd give to someone who is interested in doing that after college?

A: It's difficult. It's preferable to natively speak Spanish or Portuguese, and there are a lot of local offices being opened now, so if you were from Latin America, it'd make sense to get involved in a local office. If you're trying to break in from a non-Latin American background, it's not going to be easy, although as an Analyst it's possible to have limited Spanish and Portuguese abilities, but as you move to higher levels in investment banking, full professional proficiency will almost certainly be required. To break in, you also have to go through the standard process of networking aggressively, but again it would be tough for someone without native fluency in at least Spanish.

Q: Sounds good. I want to transition to your background in entrepreneurship, how you got started with wso/">Arden Reed, and why entrepreneurship in particular over PE, HF, or something like corporate development?

A: At the time, I didn't think entrepreneurship was a common path. When I came into investment banking, I knew I wanted to eventually follow entrepreneurship, and I would say more or less that investment banking was a side-track for me. I knew I would learn a lot, and I did, about how to raise funds and how investors think. It certainly changed my understanding of what it means to be "big" – back then I couldn't tell the difference between $200MM and $40BN because the scale is so difficult to wrap your head around. I went into investment banking knowing that I was probably going to quit after my 2 years to try my different ideas. I did receive a third-year offer from Barclay's, ended up not taking it, and this really pushed me to start experimenting with ideas on the side. For the last six months, mind you, an Analyst stint is a lot easier than during the first year, so I had a little bit more free time to experiment with my ideas. I learned a lot more about entrepreneurship and the online space, ended up building my first website, and talked to a former colleague about an idea that eventually became wso/">Arden Reed. This guy went to a Hong Kong tailor when he was in that area during college, bought a tailored wso/">suit, and started selling these wso/">suits to people at school when he got back to the States. The idea really took off and he ended up essentially funding his undergraduate studies through this business. We discussed the business model and decided that it made sense to take it online, given that by this point I had picked up some knowledge about building websites and taking advantage of the online space.

Q: And you were accepted into Startup Chile – tell me more about that.

A: Sure, Startup Chile is basically an incubator similar to Y Combinator, one of the first international incubators. They give you $40,000 and you come down to live in Santiago, Chile for 6 months, and you're only expected to take part in activities that return value to the entrepreneurial climate in Chile. Chile is a place that isn't terribly friendly to entrepreneurs, and this organization is trying to bring in about 100 entrepreneurs by the end of the year to really foment the environment here.

Q: And the idea is that you're essentially a consultant and resource for other entrepreneurs who are local?

A: Exactly, I am mentoring three people and have an intern to help with design. One of the companies that I'm mentoring is a custom shoe online store for women and I've been working with them to develop their web strategy and discussing how to move into other Latin American markets and hopefully the global market eventually. It's really interesting because you come in from a different background than most local entrepreneurs, because I'm used to seeing numbers in millions and billions, whereas folks who are starting out tend to think only locally, even though once you have the framework built, it isn't incredibly difficult to enter new markets and dramatically shift the scale.

Q: A lot of people go into banking because they work under the impression that it's beneficial to folks looking to transition to entrepreneurship – would you say that you use what you learned in investment banking frequently as an entrepreneur, or did it simply give you solid groundwork without direct preparation?

A: That's a great question. One of the first ideas I came up with, and it was a terrible idea, was a restaurant, and as an investment banker, what's the first thing I did? I built pitch materials, pie-in-the-sky financials, and marketing materials, and of course I quickly realized that this wasn't something that was actually possible. I think investment banking gives you the ability to think about what might happen in the future, how industries might consolidate, but beyond that, you have to let go of some of what you learn in banking. I learned a lot more from talking to other entrepreneurs and working on my own projects – PR, marketing, coding, hiring people – you really learn everything you need to be an entrepreneur through being an entrepreneur.

Thanks for reading guys -- stay dry out there.

Comments (7)

Oct 29, 2012 - 11:09am


If you ain't gettin money dat mean you done somethin wrong. " If you have built castles in the air , your work need not be lost; that is where they should be . Now put the foundations under them." - Henry David Thoreau
Oct 29, 2012 - 5:02pm

wso/">Arden Reed'd investment banking handbook is probably the best / most comprehensive short-from guide that I've ever seen. I pass it along at least two or three times a month - a huge resource for prospective bankers.

"There are three ways to make a living in this business: be first, be smarter, or cheat."
Oct 29, 2012 - 9:30pm

wso/">Arden Reed'd investment banking handbook is probably the best / most comprehensive short-from guide that I've ever seen. I pass it along at least two or three times a month - a huge resource for prospective bankers.
I recently got a chance to go through some of it and it seems very straight forward and nicely presented. Great for anyone looking to get a quick rundown.
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