The IB/PE Path to Entrepreneurship: A Myth?

Past few weeks I had the good fortune of meeting with two late 30- year olds, very successful, entrepreneurs in China.

One founded what is now the largest confectionery/bakery chains in China (starting from a single store). Visited his "compound" in Beijing, which included among other things, 15 horses, peacocks roaming all over the place, swans, dogs, roosters, koi (fish) etc. Rolls-Royce, Ferraris (plural). Additionally owns property all over the world. Also, is an influential member in the UN due to his photography initiatives linked to environmental conciousness .

The other is an ex-Bain consultant, who started a leading human resources company in China with four friends at age 28, listed on NYSE with marketcap of $500mil currently. Dude just IPO'd his second company and is rolling in cash.

Both have accumulated an amount of wealth that would take a BB MD decades to make. Neither did IB/PE and put it in explicit terms that beyond being able to teach someone right out of college how a large company is managed, neither job will be particularly conducive to one being an entrepreneur.

Which leads me to these question guys.

1.If one's dream is entrepreneurship, to "stake a claim in the world"- if you will, does joining IB/PE get you closer to your goals? What, if any, fundamentals/skills have you learned that may one day help you start your own company?

  1. Or conversely, do you feel that as you progress, you get cuffed by "golden shackles"- unwilling to risk a substantial yearly salary+bonus to venture out on one's own?

Any budding IB/PE entrepreneurs have thoughts?

 

At the very least, IB/PE let's you build a fat stash of cash to go and be entrepreneurial.

-------------------------------------------------------- "I do not think there is any other quality so essential to success of any kind as the quality of perseverance. It overcom
 

How much operational perspective do you get in PE though? I thought most of it would go to their operations teams while the ex-bankers spend most of their time getting deals over the line (due dilgence, structuring, financing etc) and monitoring the financials of existing investments?

 

I'm going to make this really quick. because I have seen it first hand with people

If you dont have some $$ in the bank and wish to start a business, you are going to get screwed big time. Coming from a background in IB PE VC you will most likely have a few years worth of expenses in the bank + a nice network of contacts.

DO NOT attempt to start a business without having a decent amount of cash in the bank... (minimum 15k per year)

 
Guest1655:
I'm going to make this really quick. because I have seen it first hand with people

If you dont have some $$ in the bank and wish to start a business, you are going to get screwed big time. Coming from a background in IB PE VC you will most likely have a few years worth of expenses in the bank + a nice network of contacts.

DO NOT attempt to start a business without having a decent amount of cash in the bank... (minimum 15k per year)

I would actually say minimum $100K in liquid assets outside a retirement account (that you will convert to cash) before you try to start a business. But yes, you'll need $15-20K/year in living expenses (outside NYC) in addition to startup capital costs.
 

Has anyone realized that entire thread is just a self-call for the OP?

NEWS FLASH: No one gives a shit that you sucked a couple of ex-bain dicks for a night. You could've asked the same questions without the same fucking story about how adept you've become at sucking dick under the table.

The same goes for your retarded questions. They've been answered thousands of times on this website and elsewhere. Just because you can phrase them using a different words DOESN'T MAKE THEM NOVEL QUESTIONS.

 

@sirbankalot,

Sorry if it came across as you described. What I intended to convey was simply reading about entrepreneurs on wikipedia is different than ACTUALLY meeting ones in real life. It was something of a stark reminder that IB/PE was there to serve people like this in the first place. I guess it's obvious right? But anyhow, I realized that these people aren't necessarily any smarter/more-capable than the legions of Ivy grads headed to BB's/PE's.

 

The barriers to entry into entrepreneurship with the Internet are so low as to be non-existent. Dozens of the richest entrepreneurs in America (and worldwide) never even finished (or attended) college. If I were a sharp teenager today, I'm not even sure I'd bother finishing high school before starting a company.

So to answer your question, the whole IB/PE route to entrepreneurship is pretty asinine if you know at the beginning that all you want in the end is to run your own company. IB/PE teaches you to be an employee, not an entrepreneur.

 

agreed. IB/PE teaches you how to manage capital structure and aspects of corporate finance, but it doesnt teach you what and how to sell products/services of value. Also entrepreneurship is a long process which takes a lot of time to develop, scale, and become successful. While IB/PE might give you the experience, savings (funds) to start something, your better off working a top firm in that specific market/industry and learn how they make money.

 
surferdude867:
Edmundo what kind of company would you start?

While my answer would have been different in my 20's (whatever makes the most money), today I'd want to do something I really give a shit about. I know a guy who does nothing but set up WordPress websites for people, and I'm talking really basic shit here - no customization, no content, just setting up the hosting and giving the user a blank template to start with - and he's making about $8,000 a month now. He started with less than $2,000 out of pocket a little over a year ago.

That's not something I'd want to do, because it's not something I'm passionate about. But you get the idea. You don't have to make millions of dollars or be the next Google. That's something I see time and time again on this site. "Well, if I can't be the next Google, I might as well go into banking." So anything other than becoming a deca-billionaire isn't worth the effort? Please.

These are pretty random thoughts here, and I know I probably haven't given you the answer you were looking for. If I wasn't doing what I'm doing now (freelance writing), I'd probably start another bricks-and-clicks type business centered around yachting.

 
Best Response

Having worked in IB/PE for 6 years and now branching out on my own with WSO, I can say that the majority of what I learned in IBD and PE or even here in business school was not directly applicable to building this business. Granted, WSO is small peanuts compared to many businesses out there -- but for me, it's a start and I love it = not work. (as an aside, the most valuable aspect of b school is the network -- i got top notch advice on WSO the first month at Wharton from a classmate and implemented it asap)

What IBD did do for me though was teach me the limits of "work ethic." I was in the office for 41 hours straight once and had multiple 30+hr "days". Going through that kind of physical and mental exhaustion makes you question a lot which is a good thing. PE helped me evaluate businesses and industries but was mostly an exercise on "people management" in due diligence -- which is actually very valuable as I have a lot of people helping me make WSO run day to day. Web developers, writers, resume reviewers, etc etc.

Overall, very little of what I learned is directly applicable, but I still think the experiences over a short career in finance have shaped the way I do business (whether that is negotiations, working with my team, etc.) and helped me make certain decisions. I'm super excited to be working on WSO full time in 2 weeks...now i just need to pass these 2 finals tomorrow.

Good Luck, Patrick

 

personally, i intend to own my own business one day--that being said, i don't have a great idea or the capital now to execute it. IB will give me, A) discipline to get up and go to work everyday and work long hours (which I dont have now), B) a stronger network, especially provided its followed by an MBA, C) a career that can support a decent lifestyle in the meantime

 
GoodBread:
Patrick,

Feel free not to answer this, but is WSO enough to sustain you full-time?

Yes, it is enough but only since this past summer has the site started to bring in enough to make me fully comfortable going it alone. I'll still be taking a pay cut compared to what I would be making if I went back into private equity, but the trade-offs make it a no-brainer.

Plus, we are still growing fast (traffic is up over 2.2 million pageviews/month) and i think by late this year / early next year I'll be making similar to what I would be making in PE once we build out the job board and I have more time to develop our PR and improve our SEO. I still have never really worked on WSO full time and I am confident we can make it MUCH better with more time and 100% focus.

I also plan to take full advantage of the freedom that an online business allows. After graduation I'll be in philly through June trying to sell 99% of my possessions but then I'm doing a 2 week trip to Russia with my family in July, back in Boston (my home town) for a month in August before moving down to Buenos Aires for 3-6 months. Where I go from there I have no idea, but I like that uncertainty and freedom right now and will likely be a nomad for 2+ years. I can run the site with my laptop and Skype so I don't see much reason why I shouldn't travel for a while before deciding where to settle down.

If any of you guys are down in Argentina starting in September and want to grab a drink or meet up, let me know.

-Patrick

 
WallStreetOasis.com:
GoodBread:
Patrick,

Feel free not to answer this, but is WSO enough to sustain you full-time?

Yes, it is enough but only since this past summer has the site started to bring in enough to make me fully comfortable going it alone. I'll still be taking a pay cut compared to what I would be making if I went back into private equity, but the trade-offs make it a no-brainer.

Plus, we are still growing fast (traffic is up over 2.2 million pageviews/month) and i think by late this year / early next year I'll be making similar to what I would be making in PE once we build out the job board and I have more time to develop our PR and improve our SEO. I still have never really worked on WSO full time and I am confident we can make it MUCH better with more time and 100% focus.

I also plan to take full advantage of the freedom that an online business allows. After graduation I'll be in philly through June trying to sell 99% of my possessions but then I'm doing a 2 week trip to Russia with my family in July, back in Boston (my home town) for a month in August before moving down to Buenos Aires for 3-6 months. Where I go from there I have no idea, but I like that uncertainty and freedom right now and will likely be a nomad for 2+ years. I can run the site with my laptop and Skype so I don't see much reason why I shouldn't travel for a while before deciding where to settle down.

If any of you guys are down in Argentina starting in September and want to grab a drink or meet up, let me know.

-Patrick

Patrick I love this site it offered me tons of advice. I want to see this site grow to become a major website. Best of luck

 

Patrick,

That's awesome, you are pursuing something like this after such a successful entry level career path. I am also talking with some friends along this similar line and looking to go into and finish-up B-school as well before hand. I agree with having a good solid stash in the bank and solid network before venturing out. I've seen very smart and hard working friends straight from HS and college that got burned one way or another, though one of them is doing quite well now.

I really enjoy this site because it provides a very ground level insight into certain industries. But one thing I notice, is a tendency towards "group-think" on this forums, mostly from the younger members in college.

----------------------------------------------------------------- Hug It Out
 

Also, I'd also like to take this opportunity to thank all of the users that have made WSO such a valuable resource, and stuck with us even when the site looked like complete shit and would take 10+ seconds to load.

I've made a lot of mistakes along the way but one thing that has kept WSO alive is the willingness of the knowledgeable users to take time out of their day to answer all of the questions coming from the new Chimps (special shout-out to the Certified Users).

So thank you. Hopefully the next few years will be even better and we can keep making improvements.

-Patrick

 
WallStreetOasis.com:
Also, I'd also like to take this opportunity to thank all of the users that have made WSO such a valuable resource, and stuck with us even when the site looked like complete shit and would take 10+ seconds to load.
Ya I remember those days...

WSO is my anti-drug.

 
WallStreetOasis.com:
Also, I'd also like to take this opportunity to thank all of the users that have made WSO such a valuable resource, and stuck with us even when the site looked like complete shit and would take 10+ seconds to load.

I've made a lot of mistakes along the way but one thing that has kept WSO alive is the willingness of the knowledgeable users to take time out of their day to answer all of the questions coming from the new Chimps (special shout-out to the Certified Users).

So thank you. Hopefully the next few years will be even better and we can keep making improvements.

-Patrick

Agreed on the look no offence but it would be nice if you could ask some artist to redecorate this site

 

Many times they join a company whose product or service they really enjoy (if it is not truly finance), for example the CFO of Disney used to be in IBD at Morgan Stanley. There are ways to innovate, contribute your unique stake, and add value to the commercial world outside of finance without creating an amazing new startup.

 
Putz:
Many times they join a company whose product or service they really enjoy (if it is not truly finance), for example the CFO of Disney used to be in IBD at Morgan Stanley. There are ways to innovate, contribute your unique stake, and add value to the commercial world outside of finance without creating an amazing new startup.

That's still a finance job. Being the CFO of a F100 company is a topic that has no place in this thread. Disney is not an 'innovative' company; it's a monolith in a mature industry that's lacking innovation right now. It's a gigantic conglomerate that has been around for the better part of a century. Sure he's a c-level exec but he's not the ceo (iger) and he's not the chairman (pepper). It's probably a high-pressure (150 THOUSAND employees) and high-stress job. The lifestyle the OP is trying to describe is not something you'll find working at a place like that. There are much more entrepreneurial paths someone like him could've taken.

 

I just left M&A to join a well known internet startup in NYC - most people here would know it, and recent investment by a big VC/early stage PE shop has given it a lot of validation for an already discussed exit.

I would say banking can teach you a lot, and the knowledge you build from the analytical side and qualitative strategy at 22 is certainly valuable, but nowhere near what is required to build a serious startup from scratch.

I'm lucking to be joining the start up at a stage when its at a somewhat stable period, (well capitalized, incredible mgmt team), but the feel is still that of something in a garage, where each day is a bit more ambiguous than the next.

The biggest difference between this and working in IB is the people. The work ethic is the same, but difference in risk aversion between the bankers I worked with and the young people who founded this firm is astronomical. Both types of people are driven, but just in difference ways and through different paths. I think someone said it best - banking is the most risk averse way to get rich. Of course the barriers are a little high to get in maybe, but as a non-target kid, I found banking to be the most mundane, mind numbingly painful job, despite the potential for wealth etc.

I still respect some of my MDs, but one of the biggest hitters told me he was happy to see me go do something entrepreneurial when I left. Despite how many disappointing frowns I received, he was pretty honest about how 15 years ago, IB was the only thing out there, but nowadays, the internet has certainly changed the landscape and he flat out said he would do the same thing if he could.

Not to rip on banking either - its a fantastic career, but suits certain personalities. I had analyst peers who basically outright said they were too scared too look around, or lacked the courage/motivation despite being 110% miserable. Its hard to hear people more or less give up if they are unhappy, but don't give in if you are truly miserable. People told me a few months ago on this site to "stick it out" for the 2 years - great if you're complacent with that, but don't forget 2 years if 2 years, and if you have a better opportunity before then, jump on it.

Note: attn to detail above is poor - sorry, just cant be an analyst all the time

 

IB/PE, HF's, and other Funds are all there to serve people who are ultra rich, and usually self-employed entrepreneurs.

I've always had a theory about how all sorts of Funds, Boutique IB's, and even some PE funds are all just mediums that siphon this money from the ultra rich down to the non-ultra rich (albeit, highly educated) employees of these places.

Moral of the story is: If you want to make a ton of money within the next 20 years: lean Mandarin, move to China, and start a business. Make sure you have some money for bribes and extravagant gifts too.

 
beastly214:
I've always had a theory about how all sorts of Funds, Boutique IB's, and even some PE funds are all just mediums that siphon this money from the ultra rich down to the non-ultra rich (albeit, highly educated) employees of these places.

I see your point but I would hardly call George Soros (or any of the big hitters in HF/PE) non-ultra rich. You could also claim that ultra-rich entrepreneurs siphon money off from regular people who come to "need" their products. There wouldn't be entrepreneurs without capital, and there wouldn't be capital (or growth thereof) without entrepreneurs.

 
GoodBread:
I see your point but I would hardly call George Soros (or any of the big hitters in HF/PE) non-ultra rich. You could also claim that ultra-rich entrepreneurs siphon money off from regular people who come to "need" their products. There wouldn't be entrepreneurs without capital, and there wouldn't be capital (or growth thereof) without entrepreneurs.

The difference is however, that though it may very well be true people are "addicted" to Apple products now, the firm's products also allow consumers to improve their quality of life. Can anyone imagine what the world without Google would be like today? Heck, I'd gladly "give them money to siphon" if it meant they could stick around longer.

Conversely, while I do see some, albeit extremely indirect value, to investment banking (IBD), proprietary trading and hedge funds on the other hand contribute virtually no broader social good. They exist purely to make people who already have money that much richer. It's like Vegas--- any tangible, long term value Casinos provide the world? Sure--- you could argue trickle-down... but there're are many degrees of separation between the hedge fund managers pocketing millions and the guy at your local deli.

 

I am an entrepreneur (never worked on Wall Street), and work with angel investors and other entrepreneurs on software products - some of these include ex-Wall Streeters. From my experience, having worked in finance DOES NOT prepare you for the challenges of entrepreneurship, especially how to 'stay lean', working with varied personalities, etc.

I think the best experience for being an entrepreneur is to be an entrepreneur. Get out there and do it. Test your ideas out on the market. Rack up some failures under your belt.

I have met people with pedigrees (Ivy League) whose companies bit the dust HARD (public, massive failures), and have also met those who have not gone to college but have been running profitable businesses for 7+ years.

FWIW.

 

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Alex Chu www.mbaapply.com
 

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