Why do we not all own our own companies? The majority, or at least a lot, of us on this forum work in investment banking. Essentially, we watch entrepreneurs make more money than most of us can ever dream of having by staying in the industry through starting, scaling, and selling their own company.
So, I don’t understand why so many very intelligent people choose to stay in this industry instead of starting their own company and then selling it down the line. Because, lets face it, the majority of us are in this for the money and because it’s intellectually stimulating.
I’m just curious what you all think about this. Obviously, there are a lot of entrepreneurs that do come out of the industry, but not as many as you would think. Also, bankers tend to actually be very risk averse people.
Because it's hard
You answered your own questions. Bankers are very risk averse. Entrepreneurship is about as risky as it gets. I took out a home equity line on my house to fund capital equipment in my business when I first started....
Amazon
I run a search fund but became principal owner operator of a semiconductor company. So technically 2 businesses but one in which I have an outsized stake in
I do.
...and I am never going back.
It is extremely hard to do and it takes a lot of effort (I still work 7 days a week), but once the incubation period ends...it is glorious.
It took me over 25 years to get here with a lot of ups and downs, but I recommend it to anyone.
What about your social life?
Can you elaborate
Care to talk about how you go from consulting to your own thing? Assuming you did consulting before, and not some prestigious shit like MBB?
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i don’t really know what to start that would be worthwhile
Username czech out.
Some people are Innovators. Most are Operators. The stories about young tech entrepreneurs that are widely publicized are the outliers. Most businesses fail, and there is a lot of risk involved. I graduated in 2008, made my money on Wall St in my own consulting work and parlayed that into a Boxing / HIIT gym business.
That was a crazy amount of work AND responsibility. On Wall St, we have a lot of work at a young age but often not a lot of responsibility. You will be managing derelict employees, connecting systems, doing sales, learning marketing, meeting with the bank to ask for money, meeting with architects and general contractors, etc.
In addition, there will be a BUNCH of admin things that you have to do constantly, AND most importantly you'll be putting your own money at risk. If you get a lease like I did then you'll have to personally guarantee it for 5-10 years, and if you can't pay it then you get sued by multiple parties and go bankrupt. My loss was $2.2m, and I lost everything because of COVID.
Where am I now? I'm pivoting my finance and tech knowledge into PE/VC/HF. Why? Mainly because my lessons learned were that I will be using Other People's Money for my next business, and I will only be in liquid investments (aka the Stock Market).
It's different for everyone. Try both paths. I think that people choose the Finance route because it's more clearly carved out. It's like becoming a Doctor. You know the path. Being an entrepreneur, you carve out your own path so it takes a special person to do that.
Last, let's not forget that every step of the way to becoming the next George Soros, more and more people drop out of the race. So even in the PE/VC/HF path there is a huge opportunity cost involved. Even if you make it to portfolio manager, most funds don’t beat the SP500 anyhow so 2 and 20 pay will end up being more like 2 and 0 on average for us.
I own 4 LLCs. They basically do nothing. The first three were entrepreneurial focused and the 4th was created when Covid hit and only authorized caregivers could visit my parents. I circumvented visitation rules with the LLC.
One LLC is based on design. Art design and financial design, a sort of play on words. I designed one company’s financials in Excel on a consulting basis and also have sold art designs (large scale abstract modern art) - mainly oil on canvas with a specialty in triptychs.
Can you elaborate on circumventing the visitation rules to see your parents? How did you authorize your LLC to be a registered caregiver?
I told the senior living facility I was an essential caregiver and they accepted it. It was at a time when the term “essential caregiver” was all the hype phrase, so I had to make a Caregiving LLC to meet their terms for an “essential caregiver.” My only alternative was to join a caregiving company and have them hire me to visit, but that is even more ridiculous.
Golden handcuffs
Believe it or not intelligence isn't even the most important trait in being an entrepreneur. Hell, many times it can make things worse as you are more aware of the risks involved and likely have a greater opportunity cost for not being an entrepreneur.
What matters is being able to tolerate risk, which I would guess most here are pretty bad at given how safe a career in finance is - compared to say - backpacking europe out of college for a few years
You also wear many hats. Early on you will be in charge of everything. Product, customer support, marketing, etc. for your business. Being a numbers guru or excel wonk will only go so far here if you are lacking in other areas. It's better to be above average to good at everything than to be fantastic at just one thing but bad at the rest
Lastly, you need to have insane work ethic. You will be working on your business 7 days a week, no days off. In that area I'd say there is overlap with the community here. The ability to get shit done.
But all in all, no, I don't walk into a room of investment bankers and think "man I bet these guys and gals would make great entrepreneurs"
I agree with everything you said. Not only are you working seven days per week, but you're sometimes working 24hrs just to be losing money. It can take years before your company is profitable, and you take all the risk. All these kids who complain about work-life balance are not built to be entrepreneurs. There is no work-life balance when you're building a company from scratch. You also need to take the words "social life" out of your vocabulary. You're not going to have time to "hang out" with your friends when you should be working on your company. You won't even want to because you will be so tired.
I was just about to post this haha!I will probably regret my life when I'm 50-70 if I don't take an entrepreneurial leap by then.Highly recommend anyone interested in starting a business to read 'the founder's dilemma' by the way. PS: idk why is my formatting off
I’ve been in banking over 10 years and there is nothing about interacting with investment bankers that screams entrepreneurship. Banking, in the large scheme of things, is a safe path to a very nice life and attracts risk averse individuals
As others have said, running a business is hard. Having a successful business is extraordinarily hard. Most people don't have the skills/personality traits to do it. There are also others who value time, money and responsibility differently. There's a lot to be said about a steady W2 income where all you have to worry about is your personal work (not the entire company's work). This is compounded greatly if you can get a job making 6 figures and working less than 50 hours.
Part of me is torn on that front.
Wish I couldve tried starting own business out of college for first few years but at time have zero capital, no experience, and while there is no opportunity cost of working at that age compared to later - there absolutely is a large opportunity cost of investing the younger you are. But you could take a massive risk with little consequence at that age.
Now as you get older hopefully you can keep your lifestyle expenses low. But what happens is as you make 100k, 200k, etc.+ then the nicer car comes, the larger home, maybe family with private school for kids, country club membership, etc. Again making the leap becomes riskier and more costly. If you have a pretty comfortable job making good money then it grows hard to leave how comfortable that life is.
there is very little about IB which lends to entrepreneurship so the premise your question is wrong to begin with
Not interested
lot of excuses in the thread:
- "didn't have enough capital to start a business."
- "didn't have enough experience to start a business."
- "all the easy business ideas have been taken."
plenty of people have started businesses without much capital or experience. you could have said that all of the easy business ideas have been taken 10 years ago too, yet many of the businesses that have come out over the past ten years seem 'easy'.
Well, have you purchased your fourplex yet, Mr. Bigshot?
I'm not trying to purchase a fourplex. I'm just saying that a lot of people are making excuses here instead of just saying that they didn't really go for it.
Yep. What people on these forums mean when they whine about this stuff is that they want to own a business worth millions of dollars, and they want a someone to hand it to them like getting a paycheck.
Exceptionally few people have the risk tolerance to start their own business, let alone the chops to make it successful. And everyone here falls victim to survivorship bias - for every successful entrepreneur, there are a dozen who failed. Folks who go into finance-oriented careers generally aren't aiming for that
I dunno, I see people in their 50s and 60s losing their hair and stressing about selling their business which they spent their whole life building, whereas I can just collect paychecks without giving any fucks and retire in my 30s if I want to.
if you build you own business, it'll take a lot of time until you can enjoy big money from it. even in the best case scenarios, for example Bezos and Musk, these guys spent their whole lives building their businesses. obviously now they're billionaires, but they're in their 50s now. how much do they have left to enjoy their lives? it's honestly way more fun to be a millionaire in your 20s-30s than billionaire in your 60s-70s.
"Retire in my 30s if I want."
Pity for Bezos and Musk!?
Please just STFU.
what did I say wrong?
I'll have several mil of USD in my 30s working in consulting and can indeed retire and live in LatAm and then SE Asia if I want.
and yeah, I pity Musk and Bezos. both wasted all their life to be billionaires when their body is already shutting down. you need to enjoy your life while your body is still functioning fine (which is 20s, 30s, 40s). it's okay to sacrifice 20s. but to sacrifice all your life until you're 50-60 is madness. and Musk is still working 24/7 in his 50s (at least Bezos left and started enjoying life with some sexy Latina milf). and for what? to contribute to society that hates him because he's "too rich" and "doesn't pay his fair share of taxes"?
I think those guys love the game. If you don’t love to play, you won’t excel
It is a completely different skillset. No comparison whatsover and hence no deduction that being good at one will correlate with being good in the other. Not to mention survivorship bias.
bankers are inherently risk averse - have this convo with my colleagues all the time you could make as much if not more owning an HVAC/Overhead garage door / plumbing company than being an MD at a bank - you would be better off owning a small business than working in this pos industry but most either think a small business is beneath them (not sure why if the money still spends the same) or they have no tolerance for losing their own money. Also, the reality is most ppl in the industry would burn a small biz down bc they have horrible ppl skills and have the personality of rainman and american psycho combined ... Either way the second I hit a certain number and can buy a biz I will escape never to talk to those cucks again...
Same...but when do you do if your bank pays way below-street?
SBA loan and lever to the t1ts and hope you make a decent call - i mean with the right small biz with positive cf you really aren't taking that much of a risk .... assuming you aren't a complete db and the entire staff bails after you take it over.
A lot of money to be made honestly in industries most of the world would find boring/non-sexy.
I come from an extended family full of entrepreneurs, some with nucleus family net worths in the ~$10+ million. Only one of them went to a top school (Ivy type) but all three of the ones I'm thinking of started companies in "non-sexy"/boring industries that were mostly ran super inefficiently by many competitors. They all have huge networks and get access to exclusive local 6 figure deals/investments with a large chunk of equity that can turn into low 6-7 figures over time. Large chunk of their net worth is probably locked up in investments but they still live in very nice homes.
Edit: In addition, I see myself going the entrepreneurial route around my late 30s/early 40s. Have certain skillsets and larger network I hope to develop by then. It's in what most people would consider boring but very important/dear to my passions within healthcare. I may not go all in and quit my day job but a cousin of mine did something very similar in his industry, left a job he hated - and made millions.
This ^^^ had a family friend worth $50mm running a portapotty biz and another worth $150MM owning the largest casket company in the country... they never went to college and don't have to s an md (or worse a vps) D to make 5-10x what most MDs are worth. Mind you extreme outliers but the reality is most millionaires in this country have equity ....
Reality is network and grit goes a long way. It's the main reason why I admire people like Ari Emanuel. Went to a no-name school and dyslexic but was legendary for his strong work ethic/tenacity in his earlier days in LA. Learning how to accept hurdles/struggles is important to succeed in any field but more so in entrepreneurship than any other field iMO.
One of the guys I knew drove trucks for awhile before starting his own landscaping company. He is so busy even people paying top dollar right now for lawn care needs and he declines them. Started off cutting grass and trimming trees. He owns a nice 700K+ house (paid off), and has kids and a wife in a well-area neighborhood.
I am looking to purchase a business in 2022 to run and eventually operate in.
Why not create your own? My cousin went this route buying equity or completely buying out other companies after he made at least a few million (I could tell by how nice his homes have gotten over the years). A lot of benefit of being a strong operator while investing. He's a serial entrepreneur and would argue he gets bored easily.
I have good idea
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