Why are so many bankers exiting to tech?
I’ve noticed almost all IB alums from my uni within the past three years have exited to tech strategy and ops instead of PE. Why is this happening? Can someone on the inside explain why tech has become more attractive/the logic going on? I imagine it has something to do with the hours and pay, but it feels like a dead end. Thought PE was still an incredible place to be. Are they attracting different kinds of people? Is it for culture reasons? Has PE recruiting gotten harder? Has AI disrupted hiring?
PE: high interest rate environment, scale making it harder to find operational improvements (less opportunities), businesses are being ran better, most value created with top-line growth, portcos exits are drier unless you're tech-focused (and only specific tech look at SaaS), due to K-shaped economy / crowding-out effect of AI
from an incentive level, partners staying on until they're in their 80s / bloated at the top / lack of direct promote, and the work is really banking 2.0. not to mention, matter of time before there is some level of seat-based compression at the associate level (even if it isn't absurd).
Tech: Barriers of entry to produce a new technology or service with AI is low, funding is ample, upside is uncapped in theory, you have the financial / accounting skills to be well-versed to some degree, and the work could be considered more interesting. Or, we may be at top of cycle for the credit markets, who knows lol
Also you have a level of autonomy that doesn't exist in IB, it is left to your co-founders / team-members to create something and puts your future in your hands, not in another firm. But, if everyone is doing it, chances are a lot of the ideas/biz-models are average
There is less illusion that PE is the "chosen path". I can legit remember that not so long ago people thought buyside meant = better hours = great comp upside (through carry).
These days people have realized that hours on the buyside are not really that much less than IBD but the pressure is 5x higher with super low visibility on when/how carry should materialize.
If you really look forward to work in such a intense/always on type of industry then at least you want to have the matching comp. I think the tradeoff is just not there anymore.
Based on the most helpful WSO content, here’s a breakdown of why many bankers are transitioning to tech roles like strategy and operations instead of pursuing PE:
Work-Life Balance and Culture:
Compensation and Stability:
Broader Opportunities in Tech:
Challenges in PE Recruiting:
AI and Automation:
Perception of PE as a "Dead End":
MBA Trends and Groupthink:
In summary, the transition to tech is driven by a combination of lifestyle preferences, competitive compensation, evolving industry dynamics, and the increasing appeal of tech as a long-term career path. While PE remains a strong option, tech offers a compelling alternative for those seeking a different balance of work, culture, and growth.
Sources: Tech As An Alternative to Finance, "Banking is still a place where the cool kids want to go", Banking is hot again at top MBA programs, End of elitism, Tech As An Alternative to Finance
Adding to the point above, two things I'd weigh that aren't covered yet.
Optionality: strategy, corp dev and BizOps roles use the same modeling and process skills as banking, so leaving doesn't mean starting over, and many of them keep a path back to PE or corp dev later. A PE seat is narrower and harder to re-enter if it doesn't work out.
Recruiting is a lottery: on-cycle timing, a handful of firms and very few seats per class. Some people compare an uncertain shot at PE with a good offer now at a tech company and take the offer.
On AI, I'd expect it to remove junior grunt work before it removes seats, so it changes the shape of the analyst job more than it explains the exits.
Think lots of people are missing the point here. Good hours are virtually nonexistent at most of the high-growth AI startups in NY or SF right now. Everyone I know at startups work 70-80hr weeks
The main draw is the equity upside. like every week there are 5 new AI companies raising $1bn+ EV rounds. Even 10-20bps at a bn $ valuation is worth several mm’s on paper, and for more senior hires the numbers can get even more nuts
Liquidity is also higher than it’s been before. Secondary markets insanely active, later-stage funding rounds are also including more emp tenders and promos keep providing additional equity grants. You don’t necessarily need to wait 10 years anymore for an IPO to see actual cash.
Obviously plenty of these companies won’t work out but AI is minting millionaires at a pretty insane rate right now and everyone that I speak to rn is moving for the equity and not the hrs/wlb
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