Help! MD is asking me to come with him

Hi WSO Community- greatly appreciate some thoughts on my situation. My MD has asked me to leave with him to start his own firm. What's everyone's thoughts?

Background: I'm a second year analyst at a specialty boutique. Did my first year at an EB, then transferred to get more of a WLB. Currently, love my role at the boutique- not trying to brag but considered the top analyst and all the MD's go-to analyst, numerous VPs have told me I'm on the track to being the youngest senior banker at the firm, I really like the other analysts/associates and well respected by all of them, and aim to be compensated at market rate, despite working at a boutique. Only work 60-70 hours a week, sometimes 80-90 if its crunch time. Hours will only go down as I get promoted. 

Regarding my MD- he's the best banker I've worked for. He's a former attorney and worked at a BB, so he's extremely knowledgeable and has great experience. I have very strong personal connection with him, and he tells me numerous times in confidence that I'm his favorite analyst. He's definitely my favorite banker to work for- very firm but fair mindset. I've learned the most from him and he'd back me no matter what. 

Reason the MD is leaving- he is undercompensated. The way my boutique is structured is the partners get 50% of proceeds no matter what. The MD isn't a partner, and won't make it for a long time. He's sick of being the rainmaker at the firm (brings in ~15mm a year) and not getting a big enough cut (only takes home ~1-2mm). He also doesn't really like other MDs because he considers them too soft. He wants to go off and start his own firm, with compensation structures being placed more heavily on transaction success fees (i.e., junior bankers will be awarded more % of the success fee rather than a pre-determined bonus). 

My concerns- joining a startup bank. I feel like I may not earn a competitive salary for a few years, which I'm more of a conservative budgeter in nature. Also- I'm not sure how the hours will shake out. Obviously, we'll be pitching a lot, so hours will most likely ramp up. Last, being as a senior analyst / associate, I'm not sure how much support I'll get from junior analysts, if any. I'm guessing we'd bring on more personnel (an analyst), but I feel like I'd be playing both roles.

My opportunities- joining a startup bank. I've heard it's always good to take a risk or two in your career (obviously when your young rather than old). I'm only 24, so I have a lot of time left in my career. I'll learn so much working more directly under my MD- much more than working at the boutique. We haven't talked about equity comp, but I'm sure that'd be part of the deal. 

Comments (65)

Controversial
  • Prospect in IB-M&A
Nov 4, 2021 - 12:34pm

Sorry, this is not beneficial to your question, but as an incoming IB analyst who is nervous af/pertrified, can you please share your tips/experience on becoming the best analyst at your old firm? Seems like you did it right. Thanks man. 

Nov 4, 2021 - 12:40pm
PWM Hopeful, what's your opinion? Comment below:

Please don't derail his thread.

Just had my trade dispute rejected by Schwab for a loss of 35k. This single issue alone should be a gigantic red flag to anyone who trades on their platform.

If they have a system error, and you do not video record your trading (they actually said this), they will not honour their fuck up. Switching everything away from them. Fuck this company.

  • 4
Most Helpful
  • Analyst 2 in IB-M&A
Nov 4, 2021 - 1:36pm

Not really the point of this thread, but I'll help you anyway. Fundamentally, your job is to add value to your MD and make his/her life easier. This can be done dozens of ways, but you need to apply this concept to every aspect of your job if you want to be a top bucket performer. But don't be a kiss ass- nobody likes one of those, there's a fine line. If you're a value contractor to your MD/higher ups, you're useless to the firm. I'll list a few below to help you out that I've learned being top bucket at an EB/boutique:

- Take detailed, structured notes on every call (broken down with action items). No exceptions.

- ALWAYS print your decks out and go through them with no distractions.

- Be hyper attentive to your email, but always make sure you're answering all parts of the email. I've gotten several complements from buyers, client executives, etc. how attentive I am all hours of the night (if your client is up doing diligence at 2am, you should be too). I do this by setting my phone's ringer on every night if I want to go to bed before 11pm to hear all overnight emails come in.

- Know how to model inside out, even if it's the associate's role to model. We all have downtime no matter where you work, in this time build models from scratch, learn how to LBO, etc. Extremely experienced modelers are a rare commodity in IB since the majority go to PE. You'll become insanely efficient at a model if you do this as well.

- Understand debt (more applicable to an industry group). You should know what typical leverage levels are in your client's industry, what typical covenants are, etc. Financial markets are largely influenced by debt, and it's important to understand that. Often overlooked, especially in an analyst role. Pull public credit agreements of your comps and read the terms. Even though PEs will do their debt modeling, learn how to do debt covenant/capacity analysis. You'll become extremely valuable to your team.

- IMO- play the politics game. I know this is controversial, but I always do politics. There's a fine line though, you still have to treat your other analysts with respect and don't want to spoil relationships with peers. 

- Use the quick access toolbar to create your own shortcuts (even for your outlook). This can cut down on your keystrokes. No exceptions, you should be hands-free in excel. I'm ~85% hands free in powerpoint, only because it'll be faster to use your mouse for some tasks in powerpoint. The others, you should create your own shortcuts. 

- Try to be everyone's "go-to analyst," even other analysts. This takes the form of being knowledgeable on lots of topics, projects, models, etc.

- Read and try your best to understand legal docs (stock purchase agreements, commitment letters, etc.). You'll be more responsible for these aspects of the job the higher up you get, so better practice understanding terms now

- Manage your expectations on workload. Treat everyday like you'll be leaving the office at 11pm at the earliest. Every hour before that makes you feel better. Nobody said being an analyst would be easy- you need to have the "survivalist" mentality for 2-3 years. 

- For health purposes- eat healthy (salads for lunch, non-carb heavy dinners), exercise everyday (even if its just running a 7 minute mile), prioritize sleep whenever you can.

- For your life- save as much money as you can to give you optionality if you ever want to leave IB. I max out 401k ($19.5k I believe), do a backdoor roth ($6k I believe), $10k emergency savings account, fund the rest to your savings/brokerage account. A substantial portion of your bonus should go to your savings/brokerage. 

Follow these steps, along with generally being someone who "gets it." Obviously, there's more to make an excellent analyst, but these are all the actions I live by on the top of my head. Hopefully that helps. 

  • Prospect in IB-M&A
Nov 4, 2021 - 1:58pm

thank u so much for the rundown really appreciate u taking the time to write this out for me. thanks so much man. sorry i know its not the point of ur post and i did not intend to hijack but I really appreciate it. 

Nov 5, 2021 - 11:32am
capex fairy, what's your opinion? Comment below:

Maybe a hot take here but all of this shit is OD and can ruin your life / cause quick burnout. Once I'm in bed (i.e. there hasn't been any work for an hour or two) there is a 0% chance I'm getting back up to some bullshit client email at midnight. Most of this (aside from the obvious ones like taking good notes and printing decks) is not worth it for the incremental $10-20k you get from being top bucket unless you work at a shop with better WLB than usual (which it sounds like you do). 

Saving every penny is also fucking stupid, IMO. Banking is a shit job and you already don't have time to spend money. Penny pinching is pointless (esp. with back-weighted bonus comp structure and rapid comp scaling) - don't blow your paychecks on dumb shit, but trying to save every dollar you can will make you hate your life even more than you already do. 

Nov 4, 2021 - 12:44pm
ajsoqkaks, what's your opinion? Comment below:

Well an important question is how confident are you in this MD's ability to bring in business and run a firm. One question I have is why are the partners not willing to give him a larger slice if he really is as much of a rainmaker as you say - are they willing to just let him walk? If so, and he hasn't even tried negotiating, that may not be a great sing, or they could just be idiots. Just my two cents. 

Array

  • 2
Nov 4, 2021 - 12:46pm
PWM Hopeful, what's your opinion? Comment below:

I can speak to spinning off with a rainmaker but not in an IB setting. I got hustled so it'll be more of a lessons learned than anything.

1) Get everything in writing. Words mean literally nothing. 
2) Do the cost/benefit analysis, and show him what you're leaving behind. This can't just be assumed he'll understand. Then make the numbers make sense for upside considering the risk. Clarity on both sides is key, for compensation, hours worked, expected duties, new headcount, etc. It should feel like an open conversation you'd have with your friend.
3) This isn't about loyalty. This isn't about him being likable. This is about doing what makes sense for your career. Enter with clear eyes.
4) Really, really, really assess this person's character.

Just had my trade dispute rejected by Schwab for a loss of 35k. This single issue alone should be a gigantic red flag to anyone who trades on their platform.

If they have a system error, and you do not video record your trading (they actually said this), they will not honour their fuck up. Switching everything away from them. Fuck this company.

  • 32
  • Associate 1 in CorpDev
Nov 4, 2021 - 1:09pm

Agreed, especially on the duties part. I've had some friends move into "startup banks" without clearly defined expectations about scope of roles; they ended up taking on a lot of administrative/back office duties on top of their front-office work. 

Nov 4, 2021 - 5:06pm
wdadwa, what's your opinion? Comment below:

Agreed, also on getting everything in writing. Unfortunately, I made a rookie mistake and never got what I was promised previously - had to bail the team. 

  • VP in IB - Gen
Nov 4, 2021 - 1:38pm

I've made the similar move a couple years back. Here's my 2 cents:

1) You are fairly young in your career. This is the time to take risks. When you're ~30 like me, your risk tolerance becomes much lower in life as you have more responsibilities (ie: mortgage, gf/wife, standard of living, etc). I can go on....but the point is that I can't even travel to some parts of the world because my risk tolerance is much lower.

2) You already have EB experience which is fantastic. If all else does fail, you always can fall back on your strong resume/experience. 

3) Like the person mentioned above said, have everything on paper and assess the persons character. If you believe in him, then make damn sure you believe in yourself too. NOW is the time to bet on yourself because if you don't, who else will?

4) Stay humble. It is extremely flattering to get poached and have gained the trust of an established senior. However, joining a startup with no infrastructure will be a challenging task. You WILL do everything from the ground up and set up all the processes. No job is above you. I personally found this very rewarding because in a couple years later, even if you do decide to leave the organization, you can look back at see what you have accomplished. 

I was in a similar situation during my ASO1 days, and was asked to join a startup advisory practice leaving a BB. I liked my boss and trusted him. That being said, I did everything when I joined (this includes all of the administrative tasks) but it was much more rewarding. We have grown from 3 people to 12 throughout 4 years and we DO NOT pitch at all. All of our clients have formed deep relationships with us and so its all returning business and word of mouth. Comp is extremely transparent as I get paid on a % of a deal (this was established when I joined on paper and increased throughout the years); I will be clearing close to $1MM this year as a VP. YMMV. Good luck. 

  • Analyst 2 in IB-M&A
Nov 4, 2021 - 1:48pm

This is awesome, thanks for the detailed response. The MD also has fantastic relationships, so now that I think of it, we may not have to pitch as much as I thought. How much did your workload increase when you first started, especially when you picked up more administrative tasks? I can definitely do consistent 70-80s for a few more years, but I have a long term girlfriend that wouldn't be too happy if I did that for 5+ years. 

  • VP in IB - Gen
Nov 4, 2021 - 2:26pm

Honestly, the hours initially weren't too bad (~70 hours). A big part of the grunt in the beginning was setting up templates, even IT systems for the company, staffing budgets, market overview templates, drafting agreements, and a bunch of operational stuff as well. Second year in, we also poached our executive assistant from the previous BB who helped out a ton. That being said, the founder trickles down all the profit splits even to the exec assistant to make sure they're paid well. 

4 years later, everything is running smoothly and because we don't pitch, we work considerably less (~50 hours). One thing I hated about my previous experience at a BB was all the useless work we were doing. In my current role, the message/culture throughout the whole firm is that we don't do anything that doesn't make us money. Period. If the client wants to give you the business, they're not going to care if xx chart was there...it's all relationship driven. Again, hopefully being one of the early employees of a firm, you'll be able to steer/set up this "culture".

Nov 4, 2021 - 9:54pm
Bumbledore, what's your opinion? Comment below:

As a VP joining a startup bank, what % of the deal did you get?

  • Associate 3 in IB-M&A
Nov 4, 2021 - 4:06pm

This seems like a good opportunity, but you need to make sure your downside is protected ans this is a strong enough package to justify it. EB -> boutique -> startup firm all in 2 years is a lot of moves, especially when you're downgrading banks each time.

A few small thoughts -

- Equity would be non-negotiable for me, especially if you're taking a haircut on comp and playing both analyst/associate. Assuming there's no other partners and you're employee #2, I'd want a decent chunk as well - don't undervalue yourself as "just an analyst" because you will be doing all of the grunt/admin work for the next few years.

- On the above point, I'd 1. insist on associate title to move, and 2. want more clarity on the personnel structure. If you're playing both roles and getting slammed with work and also underpaid until you close a deal.. bad times. You're going to need help even if that's just bringing on interns on an hourly basis. Separately, will there be some back office/HR/payroll type functions? I don't think the MD will suddenly take those on

- You're going to need a solid contract - equity, bonuses, comp, etc. Maybe even have a lawyer review it for you. 

  • Prospect in IB-M&A
Nov 4, 2021 - 4:33pm

I wouldn't do it. Seems too risky and I am not sure if the pros can onset the cons. But that's just my opinion. 

Anyways, it would be a good idea to actually write a pros and cons list and decide. 

  • Analyst 1 in IB-M&A
Nov 4, 2021 - 10:54pm

If he's consistently bringing in $10-$15 m a year in revenue I think it's definitely worth exploring further. See what he offers first but I would try for 10% of the fees from deals you work on and ~2% of total fees. Each of these scaling as you get promoted. First year you won't make much but from the second year forward I'd expect he could bring in at least 5 million a year if not more. That'd be 500k+ a year in deal bonuses alone and potentially more if he brings in other revenue producing folks as well.

you'd also likely get to go with him to all pitches and would learn a ton & start building a network to ultimately start generating business yourself which is really the end goal of banking if you're staying in this as a career.

Nov 5, 2021 - 8:03am
BeautifullyConfused, what's your opinion? Comment below:

Honestly depends how much you trust him. You're already being exposed to one of the most important lessons in life as it relates to careers. Loyalty to companies is useless. Loyalty to people is limitless. I have friends who run the gamut from banking to big tech, and we are constantly amazed how some of the executives got where they are because they were linked to the key players in the companies. And yes, some of them were not as a competent as you'd expect given their role. 

All this sums up to is that if you're up for the heavily increased workload but very much trust this guy, then it sounds like an amazing opportunity. 

  • 2
Nov 5, 2021 - 10:18am
SnappyBird44, what's your opinion? Comment below:

IMO I think you should take the job. MD is putting just as much on the line as you are so as long as everything is in writing I think it'll work out.

On top of that, the way you detailed your work ethic and behavior, you will have no problem landing a job and excelling there as well if it doesn't work out.

That being said (assuming your in NY), I'm an undergrad student right now at NYU and would love to intern at a start-up bank. If you do decide, and are looking for interns to help out, please PM to learn more about me.

Good luck with whatever you decide on.

Nov 5, 2021 - 10:28am
TechBanking, what's your opinion? Comment below:

I'd suggest you do it but only after getting him to write an offer letter defining the terms. You could also push for an associate title. 

  • 1
Nov 5, 2021 - 10:42am
iggs99988, what's your opinion? Comment below:

Your entire upside in this endeavor hinges on his ability to generate consistent fees. That is the entire risk. You need to diligence him and his track record more than anything else here. If this startup advisory shop is successful, it's safe to say your upside will be preserved assuming you've crossed your Ts and dotted your Is. But the outcome here will be very binary -- his success or failure. 

Nov 5, 2021 - 5:05pm
timetogetserious, what's your opinion? Comment below:

If your planning to leave get it writing from your current boss and then go back to your current bank and ask for whatever is required to get you to stay (associate promote, more money, a firm timeline to VP promote, etc.)

Let him know ahead of time that you will let your current employer counteroffer as a courtesy if they choose. This way you know exactly what your two options are as far as money, career progression etc. If he is as good a boss as you say, he will understand.

If the new bank you join is not taking off after a few months in you are going to want to be absolutely sure the old firm wouldn't have fast-tracked you to VP and showered you with $$$ if you had elected to stay.

Nov 5, 2021 - 5:10pm
MrBarelyComprehensible, what's your opinion? Comment below:

Just know it's going to be a bitch to set up...MO/BO functions will fall on your shoulders...every template having to be made again from scratch...business development initiatives...you're looking at 90 hours a week at best and probably more like 120 hours on average for the first year or two. In addition, since you'll be so lean, will you guys even have India/CapIQ/FactSet/Pitchbook/Crunchbase/in-house design/etc access?

  • Summer Associate in Consulting
Nov 5, 2021 - 11:06pm

sounds awful

  • Analyst 2 in IB-M&A
Nov 5, 2021 - 5:35pm

$10 - $15mm isn't a rain maker unless it's lower MM. If he's launching his own firm and that's all he's bringing in, I would be a little worried. That's the take home pay of some the partners at mine, not the revenue.

Your MD is honestly better served going to a firm that offers him a better package, or negotiating a better package.

  • Summer Associate in Consulting
Nov 5, 2021 - 11:05pm

get it all in writing. Do what's best for YOUR career. If you truly are a great asset to the firm & your MD tries to derail you, you can always try and land at a BB/EB again as a plan B. 

  • VP in IB - Cov
Nov 6, 2021 - 12:24am

Biggest risk is guy makes $5mm/year for next 3-4 years and quits cause he is fairly set (equivalent of 10-15 years at current place, about how long most MDs last anyway) and you are an associate 3 with no name bank on your resume that people aren't too excited about hiring and you aren't senior enough to survive on your own. That's why people stay on platforms vs go on their own or whole team doesn't follow rainmaker MDs to next shop. 

Nov 6, 2021 - 1:30am
Top Bucket, what's your opinion? Comment below:

100% agree to some prior comment about how $15MM isn't much for a MD. My group head told me over lunch one day that each MD is expected to bring in at least $35MM in fees a year. For the reference, I'm at a middle tier MM bank.

Nov 6, 2021 - 11:19am
burntwaffles, what's your opinion? Comment below:

I work at a similar shop boutique, here's some things to consider IMO

  1. Everyone is scared of not a ton of guaranteed comp but are you willing to bet on your MD and yourself? I get paid a % of deal fees like your proposal and I'll likely smoke the typical analyst comp this year. Just make sure you are honest with your MD about what you want and % of the deal fee. Do the quick math on what you think your typical deal fee would be - how do you feel about that? Some firms might have a management type fee (or w/e you wanna call it) that they rake 20% off the top of something before your calculation comes in. I would clarify him about that too. It is very nice being invested in deals but obviously downsides w the unpredictability.
  1. You gotta really trust your MD. What size of deals do you think he would bring in? I would probably discount whatever that is a little more. It's really important for him to bring in deals that not only will pay but will close AND the clients won't be mom and pop shops that are hard to market. Why? Because working at a startup shop might mirror a LMM bank for a little and you might be working with some pretty unsophisticated clients. Not saying that's the worst thing but probably not what you're used to
  1. You will likely have a wider range of job duties than you do now. The up and down sides. For example, as an AN2 myself, I get to do so much that most analysts never touch. It's awesome and you get really invested in your deals. You will literally touch every aspect of the deal so much that titles will feel irrelevant to you, you'll just be working alongside your MD. BUT you'll likely be stuck doing some things you may not want to do anymore. That's why it's important to set expectations on who and how many people your MD hires. Obviously more people help with WLB too.
  1. You miiiight be burning a bridge with your old firm. Not sure if you care or not but it prob depends how you go about it.
  1. Probably hurts your PE opps a little but I'm sure you've considered all that.
  1. Feel like I glossed over comp but tbh I think this decision goes more than that. Just remember you have so much more leverage than you realize. he needs someone to lean on like you. And if the deal isn't sweet enough, you have a great firm to just stay at.

Edit: Only you know the facts to really make the decision but I say fuck it and go. So what if you make VP a few years earlier than normal at your other bank? You'll be acting like a VP in 2 years and could be making more. The other option has a written path, I say go write your own dude.

  • Analyst 2 in IB - Cov
Nov 13, 2021 - 7:28pm

I was interviewing with one junior person who was in your situation and moved with MD, just want to highlight that is a lot of work. I was told that you have to be able to work up and down even as a vp you can and you will be doing analyst work.

I wouldn't do it unless you get some equity at least or more money than what you're getting paid now and or a promotion. Startups have little to no resources. There will be no other groups to lean on? no research group, no IT, no presentations group at least for the first year. It will be a lot of pitching. Think about that and in the end you have to believe in this MD every step of the way. Not saying you should do it or not but consider the above. On the flip side you will run processes mostly on your own which is a great experience but very very consuming

  • Analyst 2 in IB-M&A
Nov 23, 2021 - 7:12pm

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  • Analyst 1 in IB-M&A
Mar 23, 2022 - 9:37pm

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