IB Exit to x?
Aside from the standard exits like PE/VC/HF, why don’t more bankers (more so people who have been IB for 8-10 years) leave, go back to their hometown, and just buy a bunch of local businesses from older people looking to sell?
And I’m not talking about searchfunds (i think theyr useless and haven’t personally come across a successful one).
I’ve heard of one guy who’s done this (worked at S&T im pretty sure) and came back to his hometown, purchased 2-3 vape shops, deli + market, and just random businesses that are sustainable (?) without major upkeep/time required.
I also see a lot of accounts on X of guys who operate salons and other random businesses.
Just wondering if this is actually common or not, and if not, why? Feel like you can find WL balance and still make very good money + have enough experience to find and negotiate on buying a business that won’t immediately fail.
Based on the most helpful WSO content, the idea of leaving investment banking (IB) to buy and operate local businesses is not as common as traditional exit opportunities like PE, VC, or HF, but it does happen. Here are some insights into why this path might not be as prevalent and what factors are at play:
Risk Tolerance and Mindset:
Bankers are often risk-averse by nature, which is why they gravitate toward structured career paths like PE or HF. Entrepreneurship, even in the form of buying small businesses, requires a higher tolerance for risk and uncertainty. Many bankers may not feel comfortable stepping into a less predictable environment.
Skillset Misalignment:
While IB professionals develop strong financial and analytical skills, running a small business often requires a "get-your-hands-dirty" operational mindset. As noted in WSO threads, bulge bracket (BB) experience might strip away the common-sense, hands-on approach needed for small enterprises. This could deter bankers from pursuing this route.
Perceived Prestige and Career Trajectory:
Many bankers are drawn to the prestige and structured growth of traditional exit paths. Buying a deli or vape shop, while potentially lucrative, might not align with the career aspirations or societal expectations of someone who has spent years in high finance.
Emotional and Operational Challenges:
WSO discussions highlight that small business owners often have deep emotional attachments to their businesses, which can complicate negotiations. Additionally, running a business involves dealing with operational headaches that bankers might not be prepared for or interested in managing.
Search Funds and Alternatives:
While search funds are mentioned as an option, they are often criticized for their inefficiency and lack of success. However, some bankers do pursue this route or similar entrepreneurial ventures, especially if they have a strong game plan and market knowledge.
Examples of Success:
There are anecdotes of individuals who have successfully transitioned from IB to owning local businesses. For instance, one person mentioned in WSO threads returned to their hometown and purchased multiple sustainable businesses like vape shops and delis. These cases, while inspiring, are not the norm.
Work-Life Balance and Financial Goals:
For those who do take this path, the appeal lies in achieving a better work-life balance while still making good money. However, the trade-off is the potential for lower earnings compared to traditional finance roles, especially in the early stages.
In summary, while this path is not common, it is a viable option for those with the right mindset, risk tolerance, and operational skills. It offers the potential for financial independence and a more balanced lifestyle, but it requires stepping away from the structured, high-prestige world of traditional IB exits.
Sources: Do banking and PE make you a better business owner?, Breakdown of Post-IB Exit Opportunities, Leaving Banking for Entrepreneurship (Specifically Search Funds), Personally Buying a Small Business - Quitting the Rat Race, https://www.wallstreetoasis.com/forum/investment-banking/goldmans-new-policy-for-investment-banking-analysts-3-reasons-why-it-wont?customgpt=1
what is the end purpose of doing this?
Assuming your talking about IB? It changes for everyone of course. My plans/wants/etc. now will differ in 3-5 years, as I am sure it will for you too.
If you are talking about what I mentioned, the end goal would be (in my opinion) grow a portfolio of companies until you’re happy with the income—or just continue to grow?
I’m not sure, and I think it would vary from person to person.
I just always found it interesting how people who prioritize a good WL balance, raising a family, etc. don’t take this “exit,” if you will, more often. I think it’s more purposeful with higher reward than going into corpfin/dev.
interesting tbh.. never really thought of that.
because contrary to the worldview you study at university, in the real world, very few agents are rational, and agents have biases/preferences that dictate their choices (for example, due to a combination of risk-aversion/lack of interest/lack of skills, many would still refuse to follow this path even if has a higher expected return than whatever they are doing now)
That makes the most sense. I feel like the same idea almost applies to me.
It’s interesting to say the least.
Curious to why more people don’t try starting holdingsCo like Unilever or P&G. Wonder what the process for that even is
Don't know if its common from finance people, but know of a bunch of people who came out of pro sports that do this
Interesting, kinda makes sense?
Like I mentioned earlier, I only know a handful.
Not that I believe in them as I think the aim is largely off, but I have had 2 good friends do very well with search funds. Both did it coming out of Stanford GSB though and had strong, legitimate backers and had worked in VC/PE pre-MBA.
I had 2 other buddies who came from PE who failed to get a deal done, but they had less prestigious credentials. Another buddy who is just a hustler (non-MBA) crushed it in a medical roll-up search fund, but they also sort of started their own practice first so it's a semi-search fund.
Yeah I’m sure there are people who were very successful. In my experience I haven’t come across one that was.
And it’s interesting to me because its always post MBA people who venture to it. Is it because the backers feel the person is more credible?
It's a network related issue, and, yes, credibility. There are backers who think that GSB or HBS grads are the cream of the crop and want to fund them for entrepreneurship. Buying something already scaling is easier than starting from scratch. It's a low downside/high upside proposition. The people who did this well amongst my friends also did IB -> VC pre-MBA so they already had some understanding of growth businesses.
Hmm let's see, why don't I leave my luxury office with tons of perks in the centre of one of the best cities in the world surrounded by super smart and ambitious people all day to return to my hometown of 100k people with zero highly educated professionals (apart from doctors) and run vape shops all day having to deal with low IQ store managers and the general public.
Sounds like the perfect exit why don't people do this?
Kinda mentioned it already.. WL balance + you’re your own boss + opportunity to scale past what you would earn in finance.
But your point makes complete sense. I used the vape shop as an example—it could be an industry someone may have a genuine interest in.
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