Kind of burnt out of hedge fund world and don’t feel excited about the path forward. Thinking about making the move to a startup. Just wanted feedback from people who have done it or know people who have. I’m obviously aware of the risk/reward, comp, etc tradeoffs but just helpful to hear other perspectives on this. I just generally feel negative about the outlook of the public equities industries and want to go somewhere growing. My thinking is worst case the place goes bust then I use that experience to just join another one or go VC. Appreciate any thoughts.
Trending Content - Hedge Fund Forum
| +44 | Do Quantamental roles really exist? | 19 | 1h |
| +18 | Worth Joining a Small Hedge Fund? | 13 | 3h |
| +15 | Average single manager slope | 5 | 4d |
| +15 | L/S Equity Career London | 10 | 7h |
| +10 | Hedge Fund (Fundamental Long Short Equity) Compensation in Singapore Hong Kong | 3 | 1h |
| +9 | Bad PM | 5 | 2d |
| +9 | Nvm | 5 | 1h |
| +9 | …….. nvm | 0 | 2h |
| +8 | Yes, this question again… | 3 | 21h |
| +5 | X | 6 | 3d |
Career Resources
Is a HF background desirable for startups?
Not necessarily but I’m sure it has been done
A HF background is barely desirable for HFs.
Lmaooooo
Delete
Bezos worked at a hedge fund pre-Amazon, that’s my only input here
He worked at DE Shaw. And he was David Shaws right hand man. He pitched David on an eComm everything store and he said “it’s beyond our remit” so Bezos did it on his own.
The problem with a career in public equities is that the experience is basically useless to almost all other careers / jobs / endeavors.
Why? I mean you are presumably very smart, and really great at analyzing data, filtering out noise, and coming to conclusions. You know how to read financials? AND you may have a really detailed understanding of a specific sector, value chain, etc. All of that has to be relevant, right?
Wrong, mostly. At a startup, the key problems you need to solve are very different. More consultant-esque, and that's the best case scenario. So what job are you going to solve at a startup (or any corporate firm) that you have strong capabilities in?
There is the founder, responsible for the creative vision and direction of the firm. What is the value prop, how is it delivered, who is hired to lead each division etc. CTO, CFO obvious.
Lets look at divisions of any type of company: Marketing, sales, business development, customer success, operations management, engineers, product management / development, HR, etc. Maybe corporate finance is relevant a little bit, but IB is really the thing that mattered more there not your HF experience. Investor relations is relevant in big corporate world... which is where we actually do see exits from HF.
Not saying you can't do any of those things, its just your HF experience is a bit irrelevant, so its basically like starting new in a whole new field or career.
Do you have any idea what the process is like when developing a new consumer/software product, receiving feedback, solving deliverable challenges, leading a team, etc.
Right, I know all of that. I am already in advanced engagements with a few startups so I’m not looking for “is this possible” but more of “is this a good idea if I can find a good spot”?
Right - so you probably won't get great advice from this forum. You are aware of the risks, understand that transition from HF to startup to VC isn't super linear, etc. Like I wouldn't view it as a stepping stone to join a Sequoia or lightspeed (not necessarily, but you get the idea). As such, there probably isn't going to be a great sample of advice from others since this path isn't really a linear path you just follow...
You should be committed to the job you take (really any job), because it either gives you 1) great learning / accruing value for the role you want next or 2) because that is the end goal, as in you believe in the startup
Side note, I also think too many people spend time thinking about "passion" or what they think they love. It can be better to optimize for what you are good at, because you can find passion from being good at something. Its like starting the guitar, you suck at first, but eventually you get better, and a whole world of intricacies opens up. Most people don't fantasize about being a tax lawyer as a kid, but they are good at something, find fulfillment in developing something of their own, and that passion develops as they explore the mastery of it. Just some food for thought.
It's not a bit irrelevant, it's completely irrelevant.
Have known some that made the transition and had quite a bit of success. Main advantage you will have over the "average" tech employee is work ethic and those that succeeded really leveraged this to their advantage.
Make sure you take a break and don't start "burnt out", doing something new will require a lot of hours but given where you (probably) are in your career plenty of time to catch up and get ahead.
Thanks that’s helpful, any insight into how they made the move I.e. how did they leverage hedge fund experience to pivot and what type of roles did they take?
Management in sales / operations / finance functions. Not much domain specific knowledge from their hedge fund experience, just the ability to hustle and learn new domains quickly, which is often the most important determinant of success at a high growth company.
One of them runs a business unit now and manages a P&L, which is in some ways similar to this job
Interned at an MM HF for a year -> SS ER -> VC -> Founder.
Strong work ethic and a high slope (climb learning curves quickly) are the two assets you can bring to a start up on day 1.
I'd say the focus should be a Series C company or later where you can still have the opportunity to build processes and not get bogged down by layers of approvals.
Don't focus on strategy roles, they're mostly BS. I'd focus on generalist business operations and finance roles where you're not just creating a strategy but actually executing it. That's going to drive more impact that being an internal consultant with minimal authority.
If you are good at pitching and want higher comp, I'd gun for a sales role. You'll need to start at the bottom but if it's something highly consultative that requires you to understand your customer's business, it can be really fun and fulfill the "eat what you kill" motivator.
Generally though, there isn't a clear path to success. The goal is to show you can work hard, drive impact in whatever role they have, and deliver on 1-2 visible wins in the first 3 months. Once you do that, you'll have a lot more autonomy and authority to compound your value at the company and reap the upside as it grows.
Would you recommend your pathway over the traditional IBD-PE/VC?
No, my path is an "n of 1" and I wouldn't recommend it for anyone. But that's kind of the point. Anyone looking for major career upside (optimizing for learning/growth vs. $) is going to have to take risks and, as a result, will likely have a large portion of their path be unique to them.
At the end of the day it's about knowing the right people at the right place at the right time. Sometimes one of those just doesn't work out but you can increase your chances of success by:
1. Building relationships -- eventually when you know enough people, you'll get fed opportunities
2. Learning by doing -- getting hands-on experience and making mistakes gives you more perspectives on the risk/reward of different opportunities
3. Being persistent -- timing doesn't always work out but continuing to follow up will give you a better shot when the timing does line up
Do you know how to sell? Do you know how to code? Do you know how to talk to customers and find out what their pain points are? Start ups are not the world of arbitrage where you buy low and sell high. It's the world where you actually have to solve a painful enough problem that people are willing to pay money for your solution.
Being totally brutal honest here, no one cares how much alpha you generated as an analyst or PM. Those skills don't tract or matter when you're dealing with high ambiguity when trying to build a product where you don't have product market fit, or even know if there is demand for your product.
Like @determined mentioned above, Series C+ scales ups might have some work for you, but your best bet is sales or finance at a start up. I'd say your best bet would be to try to find work at start ups that cater to the HF/PE space selling them SaaS products that solve their problems. Loads of "AI" focused companies which focus on automating a lot of the grunt work that HFs and PE funds deal with on a day to day basis.
I did this transition myself. This is a retarded move. Your skillset is useless. Your work ethic is useless. Your intelligence is useless. However, you will learn a lot of wisdom for why this was retarded if you do this move.
(Note most of my comments apply to either being a founder or working for a Seed or Series A company. If you work for a later stage comapny, then my comments may be slightly less applicable, since theni t starts to look more like just leaving to work for corporate.
Note that the ONE exception to this that I have seen where this MAY make sense is if you work for a pre-IPO startup AND you are VERY sure they will in fact IPO or have a liquidity event. For example, I saw one guy left some HF to join Juul 10 years back and who likely made $10M. This I would call a success if money was your objective (and you of course ignore any of the moral implications), but note that success only occured because the company had a liquidity event. Had this not happened, it is very likely the equity could have been worthless.
If you are not CERTAIN there will be a liquidity event, you should assume it is extremely unlikely to happen while you work there (even if you think it will happen eventually). In this case, you should try to negotiate for the exercise window on your options to NOT have the default 90 day period. If you do not do this your equity is worthless with near certainty. However, in almost all cases, you will not be able to negotiate this unless you have an extremely high amount of leverage. In certain time periods, engineers would sometimes have this leverage, but there is almost no scenario where you have this leverage, since you do not have useful skills to a startup. This is very hard for most people to believe, which is why I recommend you speak to a lawyer, since I know you will not believe me. Note that startups are not required to inform you of any of this. This is a big reason why it is valuable to hire ex finance people and consultants, since they will think they know this but don't, leading them to overvalue their equity compensation. Meanwhile they will leave in 2 years and unknowingly leave their equity worthless. This makes ex-finance people an excellent deal for startups.
If you are starting your own company my recommendation is don't. It's easy to forget, but remember how hard it was to get your internship in banking and all the prep you had to do? Then remember, how you might have had years as a banking analyst getting good at excel? Then a year or two at a hedge fund to learn the ropes? It's easy to forget this but the reality is it takes years to be good at literally anything and work outside of hedge funds is no exception. A lot of finance people assume that because they succeeded in a competitive field they can now waltz into another field and use the genius they have gathered. They also generally assume they are smarter than other people. This is retarded. Please don't think this. You should expect that your intelligence or hard work counts for nothing, nor does your pedigree. Literally no human knows what Citadel or P72 or Evercore or whatever is. The ONE exception is VCs, because they drink the same prestige koolaid. The ONE area that I DO think my finance background helped is that I had some friends that thought I would be a good entreprenuer because they believed these non-sense things finance people believe.
There is a reason why the most privileged people in the world want to work in hedge funds. It's because it is honestly the easiest way to earn $1M a year. Privileged people usually take better options - that's how privilege works. I know people think this game is hard but it isn't relative to how most mere mortals from non-privileged backgrounds attempt to earn a similar amount of money. Yes there are people that make this much from owning a bunch of sandwich shops, but they only get to do that once they spend years upon years learning a lot of fine nuances of the business that honestly just take a lot of time. You get to underperform for years and do worse than a monkey with darts and you still get paid. Don't give this up unless you have to. You succeeded primarily beacuse you followed a VERY tracked path and checked off MANY boxes to get where you are. It's very easy to forget that.
Also do not think even for 1 second that it will be easy to go back to working at a hedge fund. It will not be. If you do not believe me, do a backtest yourself by looking for people that say "Founder" or "VP of" on LinkedIn that previously worked at a brand name hedge fund. Note how many went back to working at hedge funds after. You are more likely to get a job as a software engineer after as a HF -> Startup person than to do HF -> Startup -> HF. I say this mostly to say that you are extremely unlikely to ever go back to working at a hedge fund again. People will be extremely skeptical of you.
Any views on how this is different if someone leaves PE or VC to join a startup or found a startup? Are the skills a little bit more translatable?
On the founding a startup point, I think people really shouldn't do it if money is their main priority... they should do it if they will always regret not doing it. The NPV math will ALWAYS lean towards finance (HF, PE, IBD).
PE/VC to startup does happen, but going the other way is very tough and only for senior executives in the startups who had a lot of VC contacts already and most likely a substantial exit. A random engineer in a startup will not have that. The startup itself might be a small fund or prop shop though (VCs generally won't be interested in this, unless crypto focused), which I have seen quite a few people do successfully, but they are not necessarily making more money than their old job.
Also privileged people do startups, but VCs treat them as special cases and have lined up bankers and investors from day one to sell the company in X years. I can think of several cases like this. If the VC are just giving you a seed round but not any of these contacts, they are not taking you seriously.
It is MUCH easier when you do PE/VC than HF to maintain optionality to go back. And by much easier I don't mean 10% easier, I mean 10x easier. It is near impossible to go back to hedge funds after leaving to work in startups for more than maybe 6 months or something, but for PE it is more accepted since many PE funds send their associates to PortCos and people are used to seeing something like this. Obviously for VC everything I am saying is inverted -- they actually prefer this background of someone who did finance then worked at a startup. This is because actual founders know that a traditional finance skillset is worse than useless (e.g., actually very negative utility) for your understanding of how early stage companies work (e.g., I honestly think what most hedge fund people think about early stage companies is extremely arrogant and misguided; a startup is not just a big company with smaller numbers attached to it).
The skillset transferability issue is similar between HF and VC though. The exception to what I am saying is that if you work in corp dev / corp finance then of course the skills are transferrable for both HF and PE/VC, but PE/VC is of course more transferrable. But those roles only exist for late stage startups. But for late stage startups (e.g., raised $50-100M or something) then I would argue it's not a startup anymore because that's a f-load of money. For early stage startups (or founding a company), this skillset is almost always useless. The only exception is of course if you are founding a company that very very directly uses your experience in finance (e.g., you are starting a fintech platform for finance professionals that directly pertains to your past experience or you are doing a search fund if you consider that to be a startup).
Thanks to LLMs I figured this out quickly, but I was also shocked just HOW bad pre-IPO equity comp is.
And what's even more egregious... startups will quote a $250k base with $400k equity vesting over 4 years as "TC $650k".
Obviously, nobody will mention the strike price and the 90 day window ...
Ut quia hic quae libero. Repellat cumque est necessitatibus est autem facilis hic error. Ex totam quibusdam quasi nisi. Id est unde sequi libero atque.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Et earum quia omnis aut et. Voluptatem delectus ab qui possimus voluptatem aut esse. Enim labore eum suscipit ea sit doloribus placeat.
Sapiente dolore necessitatibus molestiae dolore quia dolorem sit. Ipsa rem dolorem officiis sequi maxime.
Excepturi vero rem rerum est rerum. Doloremque ratione omnis qui non vel.
Qui debitis voluptas ut. Et quos ut vel non eos. Et sint facilis doloremque et doloribus. Tenetur blanditiis delectus qui quos et. Ea neque dolorem sequi consequatur dolorem iste. Voluptas beatae non inventore non vel aut.