Do bankers actually make good entrepreneurs
I often hear from people trying to break into this industry that they want to use banking as a platform to run their own startup, but honestly this makes no sense to me. Most bankers I’ve met are pretty risk adverse which is the opposite of what an entrepreneur is. How does the skillset in banking really help you run your own business, yes you learn about all of these different companies at an important point in their life but these are listed players not startups and it’s not like what you’re learning about the industryt or company is super useful, it’s all very surface level. Aside from grit and hard work from my understanding you’re not really learning anything that’s applicable to running your own business. Curious to hear thoughts from people here, do Ex IB/PE guys make good entrepreneurs?
If a tech person told you the best way way to be a banker was to become a SWE, what would you say?
If a banker told you the best way to be a entrepreneur was to be a banker, what would you say?
If an entrepreneur told you the best way to be a entrepreneur was to be a entrepreneur, what would you say?
Very philosophical, so what does the entrepreneur do?
Fail
Do consultants make better entrepreneurs?
Would make sense on face of it. Lot of work they do is BS but that BS revolves around market strategy, supply chain, pricing power and so on. All more relevant to starting a business than experience gained in IB
Qualified to answer this having worked with ex banker entrepreneurs and one myself. Yes and no.
Doing a year or two of banking has so many cross advantages to entrepreneurship it’s not even funny. You understand how to raise, you understand valuation, you understand the basics of finance, you are efficient with your time, have an aggressive work pace, are confident and professional and not afraid of senior execs. All of these are really key to being a good entrepreneur. I’d give the advantage to a year of banking over a year of consulting frankly.
Where it falls apart is those that stay too long in banking. I can’t remember who said it, but some Warren buffet type character said something along the lines of staying in that job long enough kills your creativity. Banking is very much a rigid hierarchy and is a non-entrepreneurial endeavor. Further, the pay is comfortable and presents many opportunities for high paying jobs with little risk.
The combo of a job with seniors beating the creativity out of you, lots of mundane work, and high pay makes people that have stayed in banking long enough highly unlikely to be entrepreneurs. If you make 300k a year in your mid 20s, why would you risk it all? If you just stay on the path you are on, you will be upper class.
Another detail is the high attention to detail and professionalism eventually backfires—a lot of entrepreneurship is working with people less capable than you are. The harsh reality is growing a business requires upgrading people as the enterprise scales. More often than not, the person who is a great 4th hire can’t scale with the organization when it’s a 100 employee or 1000 employee enterprise. The banker is used to working with only the best and brightest (hence why they are terrible managers) so more often than not, bankers do not have the ability to manage early employees and they end up being pretty terrible entrepreneurs.
Lastly, I would say the type of person that gets a banking position is someone who follows the rules and studies hard. This typically isn’t the type of person who thinks outside the box or is comfortable doing something original and ground breaking that warrants a new enterprise.
I’ll also add, entrepreneurship is overhyped. There is a lot of survivorship bias and you don’t see the disaster outcomes. Having a better risk adjusted like IB or a spinoff career from an analyst seat is really a lottery ticket if it’s played right.
TL;DR:
The job is helpful for entrepreneurship if you do it for 1 or 2 years, but the reality is the type of person that can land a banking position is more often than not unable to be a successful entrepreneur. Further, past 2 years the job works against you by making you uncreative and comfortable financially.
I think traders make better entrepreneurs
I have actually come across a few trader and PWM guys turned entrepreneur that have built some pretty killer businesses - no one from IBD yet
Usually they are partnered with or have someone quite senior on their team who has a wealth of experience in the sector already
From my interactions, definitely not. Banking (M&A specifically) is fairly risk-averse and a repetitive process. If you've done one sell-side, you can do plenty more with the same exact process, with just the deal size being the main difference. You're taught a cookie-cutter, time effective grunt process which you'll be able to replicate 3 dozen times over. Entrepreneurs involve greater adaptability and versatility
I don't think the current job is related to how successful you will be as an entrepreneur. I deeply believe the entrepreneurial midnset is something innate, so is the risk tolerance and you either have it or not. Of course I'm simplifying because this can be developed over the lifetime to some extent, but nevertheless some people have that mindset while the majority does not. I was working on creating a start up in the past, still hoping to set up a proper one if the future and I always liked an idea of entrepreneurship. I am also risk tolerent which many people are not. Yet I work in finance. My observations at F500 where I'm working are that the vast majorty chooses a corporate role because it's seen as safe, cushy and the vast majority of those people wouldn't make good entrepreneurs. Even our internal due dilligence, investing processes take ages, it's all painfully formalized and people always want to take a proof that they are doing the right thing. With entrepreneurship you need to trust your instincts, not everything can be quantified. Obviously the knowledge of finance massively helps but there also is a separate thing which I mentioned at the beginning - the entrepreneurial mindset.
Forreal. Entrepreneurship (at least as it's practiced in most developed western nations) is almost a neurochemical and genetic makeup. The people I know who started successful ventures all had that dedicated, disciplined, but mildly megalomaniac/sociopathic feel to them. A person who just follows the rules, or who likes taking things in a chill manner, don't make good entrepreneurs, as being mildly mentally ill in a certain way is almost a requirement, if you want to go down that path.
Also, if you don't foam at the mouth at the thought of getting what you want, on top of being delusional in your own assessment of yourself, I don't see how its going to be easy for you. It's a lot of shit eating in the beginning. It's also why heirs, unless they inherit that mentality/cognitive map, make sub-par successors.
Network and upbringing matter a lot to, especially in emerging markets. If you have connections to bankers, capital allocators, influential politicians, you're life will be far easier as well. Not a requirement in the US, but a hard requirement in most of the world.
Very few have the risk tolerance to be entrepreneurs themselves. Usually seen ppl do 1 year of IB and then join like a Series B start up
Here's my 2c. I stayed in banking for about a decade and was a Sr. VP when I left the boutique I went to after leaving BB's in NYC (they had already offered a partnership to me). I had always wanted to start a business with a tangible product. Most of my family members have successfully started businesses, and it was something that I always wanted to do. I primarily focused on tech throughout my career and am an engineer.
I met my now co-founder who had a health tech idea, and we ran with it. I found banking to be very helpful in starting a company. In the early days I was good at working on tight deadlines, having limited support and needing to take a broad based view of business objectives. I also knew how to run product. Our company was in healthcare, and my co-founder was a physician. He had to train me on how healthcare worked, but I understood funding and running a business. It worked well.
We grew the company to ~240 employees, significant ARR and a very good reputation in our market. To one of the points above - I got stressed out once we crossed 100 employees, who in the end all reported to me. I'm good with engineering, exec leadership, product, selling, positioning, etc. What I hated was HR related nonsense with junior employees that started popping up more and more. I have tons of great examples. After 11 years I decided to resign as CEO and let the board bring in new leadership...I stayed on running it for another 6 months or so. They also kept me on salary as a consultant for another year after I left. The company continues to do great. I love figuring things out, but managing large teams isn't my forte.
The company is growing, profitable and doing very well. I am now in an operating partner role in PE.
Super interesting. Would you mind sharing examples?
Here's an example - We had a woman in marketing who matched all of the worst descriptions of a millennial...super self-entitled, somewhat lazy and abrasive, constantly causing drama, marginal performer. If you didn't agree with her, you were wrong, despite the fact that she was very short sighted. I was the CEO, and she'd argue with me non-stop about complete non-sense like re-organizing as a public benefit corp and other things that made no sense for a variety of reasons (we were VC backed).
She was on and off of PIPs constantly and would always do just barely enough to save herself. She got pregnant and on the way out for our 16 week fully paid maternity leave, which she also complained about as being too short, she said that she needed a raise and title promotion on her way out the door. We were already at the point of firing her, but with a baby on the way we couldn't do it. We simply told her that we'd hold her position for her when she was ready to return. She returned and quit on her first day back because she found a "better" position. I know her CEO (she has no idea), and it was effectively a sideways move at best. He also regrets having her on their team but is worried about firing her as he views her as a risk for a lawsuit (I have only given him limited details). That is exactly what she did with us. We did everything and well beyond what is legally required for her maternity leave. Well, sure enough, she sued us and walked away with $55k because our insurance company decided it was cheaper to settle than fight with her. In my state I had to go to court appointed mediation for the lawsuit. That was super painful and wasted nearly a week of my life in a crappy govt office with this 80 yo mediator running back and forth since they won't put you in the same room. The mediator knew it was baseless, but she also said that this is just how it works.
I wonder if I should have sued every prior employer for departing on my own terms. I'd probably be $500k richer. Our legal/insurance system is broken when it would cost $500k to fight a baseless claim so the insurer is simply willing to put up money to make it go away. They told us that if we fought that our premiums would go up but if we settled that our insurance would remain the same. Easy decision as an executive but super painful to make for someone who has a sense of right and wrong.
Ipsam vitae debitis reiciendis rem quos et aut sit. Corrupti aut quibusdam non ut minus expedita. Omnis iure illum autem culpa cumque.
Facilis recusandae molestias nulla vitae quod. Voluptatem molestiae qui facilis dolorem quidem minus. Quod suscipit quibusdam velit blanditiis facere id.
Aut minima in optio quia assumenda. Voluptate fuga quibusdam est. Dolore tempore voluptate natus repudiandae dolores consectetur perferendis. Tenetur quidem id laudantium sit iusto. Voluptatem adipisci qui unde natus animi omnis. In accusantium cupiditate reprehenderit et.
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...