Leaving banking in for VC backed startup?
I wanted to come onto this forum and ask for some insight from those with more years of experience than me to get some of your perspectives. I am an analyst at a good bank in Chicago, think (HL/LAZ/WB) type of bank. My job is fine, and the hours aren't the worst. It's nothing to complain about compared to others I know, and the compensation is great at this stage in my life.
Before this week, I was planning on going to LMM/MM PE, but a friend of mine doing his masters at Stanford reached out to me about joining his startup in a finance business development role sometime in the next 6-12 months. It's gotten a ton of attention from well-known VCs and startup accelerators. I am very interested in the position, and the compensation is only a little haircut but includes an equity portion, which I believe could end up being very lucrative.
I've read on this forum that IB/PE to startup is generally thought to be a bad move so I wanted to see if these are the types of conditions that would make this move solid.
Based on the most helpful WSO content, transitioning from IB to a VC-backed startup can be a solid move under the right conditions, but it comes with risks and considerations. Here's what you should weigh:
Equity and Compensation: While the equity portion can be lucrative, it's important to understand the specifics. As highlighted in WSO threads, startups often don't offer significant equity stakes to non-founders, and even those at the top may hold less than 10%. Ensure you have clarity on the equity structure, vesting schedule, and potential upside. Remember, startups can be volatile, and equity might not always translate into meaningful financial gains.
Career Trajectory: Moving to a startup can provide broader responsibilities and exposure to senior management, which is valuable. However, as noted in WSO discussions, startups don't always offer clear paths for promotions, raises, or bonuses. If the startup fails or stagnates, you might find it challenging to re-enter traditional finance roles like PE or IB.
Startup Viability: The fact that the startup has attention from well-known VCs and accelerators is a positive sign. However, you should still conduct due diligence. Understand the company's financial health, market position, and growth potential. A Series B-D+ startup with $50M+ raised and a lean finance team (as mentioned in WSO threads) is often a better bet for impact and growth opportunities.
Personal Fit and Goals: If you're disillusioned with the structured nature of IB/PE and are drawn to the dynamic, entrepreneurial environment of a startup, this could be a fulfilling move. Startups often appeal to those seeking to make a tangible impact, gain operating experience, and work in a less siloed role.
Exit Opportunities: As discussed in WSO threads, transitioning to VC or other roles post-startup can be more feasible if you gain meaningful operating experience. However, this path is less predictable than the traditional IB-to-PE route. If VC is a long-term goal, working at a startup could be a stepping stone, but it's not guaranteed.
Key Takeaway: This move could be solid if: - The equity package is substantial and well-structured. - The startup has strong financial backing and growth potential. - You're genuinely interested in the startup's mission and the role aligns with your long-term goals. - You're comfortable with the risks and potential challenges of re-entering traditional finance if needed.
If any of these factors are unclear or don't align with your priorities, it might be worth reconsidering. For more insights, you can explore related discussions on WSO, such as the thread "Why You Should Reject that Start-Up Job" (url: https://www.wallstreetoasis.com/forum/investment-banking/why-you-should…).
Sources: Leave well-known MM ER firm after 2-4 months for new VC firm?, Quitting major Investment Bank in NYC after 2 months...?, https://www.wallstreetoasis.com/forum/venture-capital/qa-corporate-development-analyst-at-a-tech-startup?customgpt=1, Breakdown of Post-IB Exit Opportunities, Help! MD is asking me to come with him
Why do people generally say IB to startup is a bad idea?
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