Q&A: Technology IB Analyst

I interviewed for a general offer and then went through a group placement once I received the offer, so I never got asked any tech-specific interview questions. Common tech specific topics that you could get asked, though, would be questions about LTV/CAC ratios, net retention rates, churn, when to value on revenue v. EBITDA, growth rates, difference between booking and billings / how deferred revenue plays into this, annual recurring revenue (ARR), and things of that nature. Many of those metrics are pretty SaaS specific but can be helpful for much of tech.

Here are a couple of useful links for many of these metrics:

https://a16z.com/2015/08/21/16-metrics/ https://a16z.com/2015/09/23/16-more-metrics/

I figured out I was interested in Tech IB mainly from talking to many people in IB, though I also had an interest in tech much of college. Another big piece for me was the people / culture of the group - when I met the people in the group at the time I really gelled well with them. Those facts along with knowing that tech opened many doors after IB (PE, HF, GE, VC, Tech Corp Dev, startups) are what pushed me to tech.

The biggest frustrations I have had are the inefficiencies of IB at times, though that is not limited to tech.

In terms of exits, you're not limited to tech-specific (we have ANLs in our group going to a variety of PE funds) though it does leave that option open.

I wanted to do GE since I wanted to work with smaller companies and be able to be more operationally focused / create value through company growth instead of only financial engineering. I like that GE is in between VC and buyout PE, so you still get the modeling experience but it's a bit more qualitative / business model-focused than buyout. I also really liked the people at the fund I'm going to.

We don't get a ton of exposure to the actual technology in IB, which is a side that I'm interested in. So yes, we're pretty disconnected from the actual tech/products and much more focused on the financial side. That's another piece I'm hoping is a bit better in GE.

It depends role to role and company to company, but it's definitely possible to do non-finance roles at tech companies (though it might take a bit more effort/networking depending on the role). Corp Dev is the most similar to banking in terms of skillsets and the most common path for someone going from IB to tech. Bizdev is doable, though the skill set required is a bit different than banking. Product is probably the hardest transition of the roles you mentioned. Though banking is helpful with the strategy side of a PM role, we don't get exposure to engineering / UX / data science which are all important for most PM roles. That's not to say it can't be done, it would just take some extra work.

Following!

For our bank (and I believe most BBs) you go through a general interview process and then, once you get an offer, you go through a separate group placement process. For this reason, I didn't get any tech-specific questions in the interview, though I did talk about tech since I had been following what was going on in tech at the time.

you still looking for an IB job after not going to med school?

When I was asked this, I mainly talked about my interest in tech and talked about certain deals / trends that had been happening in the space to show that I was following what was going on. I think showing interest and a curiosity to learn is huge when asking about sector interests.

Also, on a more personal level, I also talked about how much I liked the culture of the tech IB group I was looking to join. Working with people you like in IB is huge.

1) The main verticals we cover in tech are enterprise SaaS, FinTech, EdTech, Healthcare IT, business services, consumer internet, ecommerce, and payments. Our SF team also covers semiconductors. In NYC we do hardly any hardware - it's all mainly software and services.

2) It's hard to make too much of a distinction between these categories since there is a lot of overlap here, though there are some difference I'm happy to expand on. For EBITDA margins, margins are typically very high for software / SaaS businesses and much lower for services business given the higher costs of employing more people. SaaS models are typically all recurring revenue which investors love, whereas payments, consumer, ecommerce, and services have less predictability for revenue. Margins / being FCF negative or positive is a functions of how much startup costs are and how much money a company is reinvesting into the business to grow - this is more dependent on company stage rather than vertical.

3) Valuing any of these verticals is largely the same - using public comps, compsacqs, DCFs (less so) and LBOs. The biggest distinction is usually whether to use EBITDA multiples or Revenue multiples based on company stage in its lifecycle. I'd encourage you to read some of the answers above for more specific metrics.

Hope this is helpful! Happy chat further!

1) Breakdown depends on what the deal is, what stage it is in, and how high profile the deal is. In high profile / larger deals, typically the tech group will do all the positioning (comps, compacqs, industry trends, company story) and the product groups will focus more on the M&A, IPO, etc. processes themselves. We work very closely in these situations. For smaller deals, sometimes we won't have a product team, so we will cover positioning and process specific work.

2) Common DD for tech is DD around customers, company model projections, churn rate, LTV/CAC ratios, code / technology reviews, Net Promotor Scores, TAM assessment, cultural fit, ongoing legal battles, and things of those nature. Deal breakers could be any of these things but often times it's because of a disagreement on price or major red flags like legal battles.

3) Common modeling work includes operating models, paydown / LBO models, DCFs, and merger models. These are what we spend most of our time on when modeling.

Hope this is helpful!

you would drop $650 on a ps5 though sooo

We often work together with FIG on payments / insurance tech / broader FinTech deals. It depends on which group has a relationship with the company as well as whether it's more of a finance company enabled by technology (more FIG related) or more of a pure FinTech or even technology company expanding into finance (i.e. Apply Pay and Alipay).

Hope this is helpful!

I wouldn't say there's too much that particularly TMT focused but some great resources are the Breaking into Wall Street 400 Question Guide and the Vault Guides. Beyond that, I would say just continue to follow what is going on in the TMT space in the news and make sure you have a focused, concise reason as to why you want to do IB. Good luck if you have an interview coming up! Happy to talk more if helpful!