Startup vs. IB

Hello everyone,

I am a senior who has an offer from an elite boutique (satellite, not NYC). However, the group (which will remain unnamed) is doing terribly and there is a possibility it will go away in the coming years. I also have a few technology startups offers with a salary ranging in the 60-70k in SF. A few look somewhat promising and with the tech boom that is coming up, I'm not sure what to do.

Investment Banking vs Startup

Working for a startup and working in investment banking are two very different things. One is for the risk-averse while the other is inherently risky.

Working at a startup requires just as much if not more sacrificing of personal time as investment banking.

Startups often fail. Startups are likely to pay significantly less than banking with probably the same amount of hours.

So what's the appeal? Theoretically, it's high risk, high reward. Indeed, it's usually only high reward for management. Joining a startup could be worth it though if you believe in the product or mission 100%.

Investment banking is the opposite. It's for the risk-averse (save a market downturn). It's a popular job because it provides diverse options for future employment and great pay. However, sacrifice in free time and job satisfaction are significant.

from certified user @SSits"

The key question is where are you in life and what level of job security can tolerate.

Looking to get married soon to a dependent lady who wants to pop kids? Go for investment banking for better job security and compensation.

No attachments to a financially independent partner or have a strong cushion of savings? If I was in your position, I'd go gamble on the startup for a few years on the basis that the opportunity cost/impact.

There are more factors like this eg where you want to get to in life, how old you are

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Comments (63)

Feb 25, 2014 - 8:55pm
Matayo, what's your opinion? Comment below:

recommend you actually tell us what the firm is so people can comment on the validity of the statement without it, best anyone can do is conjecture

honestly, are all of you people so afraid to even reveal a modicum of personal information? no one really cares about you

anyway, yes, in my opinion there is a definite boom coming to the tech industry even if your bank's businesses ceases to exist, you can still ride on the name value of the company for at least 2-3 years can't say the same about any random start up

.
  • 1
Feb 25, 2014 - 9:18pm
Matthew, what's your opinion? Comment below:

Can't say for sure but my gut would say to go with IB. Guaranteed brand name vs. virtually guaranteed failure. Plus you can easily move to the startup full time if banking isn't for you.

What role would you have at the startup?

Feb 26, 2014 - 8:21am
itecya, what's your opinion? Comment below:

How big are these tech start-ups? If you go to a start-up and want to get into banking a few years later, it's going to be relatively hard. If you start off at an elite boutique, you'll have some name recognition on your resume and have a few more doors open after a year or two.

Feb 26, 2014 - 8:49am
duffmt6, what's your opinion? Comment below:
diaosi:
the tech boom that is coming up

Not sure if serious...

We are in the midst of the biggest tech boom since the dot com bubble in the late 90s.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
Feb 26, 2014 - 8:54am
karypto, what's your opinion? Comment below:

Start ups LOVE to work you to death. https://michaelochurch.wordpress.com/tag/vcistan/ Then again so do banks. Depends what kind of role you have at the start up. Care to expand ...

Feb 26, 2014 - 11:17am
chicandtoughness, what's your opinion? Comment below:
meph:

Do you want to be a banker or work at a tech startup? Pretty simple answer here...

This.

Not trying to be elitist here, but only do a startup if you're prepared for what being in a startup actually entails. That means, yes, sometimes working IB hours. That means probably failing. And failing again. That means your salary probably being on the low end of a given range (sometimes less... or sometimes you get paid way late, lol). In short, do a startup if you believe in startup culture and actually want to champion the product you're building/selling. Angels and VCs can see through half-assed interest - they want to invest in a group of guys who are actually passionate about what they're making, not the guys who managed to hop in because of the "tech boom" or the prestige or what-have-you.

(Obviously the above doesn't apply to large-scale "startups" like Yelp, which are in a growth position already. I'm talking early-stage/seed-stage).

That said. Why not go to the elite boutique in the shitty group for 2-3 years, and then leave when (or slightly before) it closes? Entry-level IB is a 2-3 year stint anyways, so you can gracefully exit and then go tech-whore or apply to b-schools if it turns out your interests change.

Currently: future neurologist, current psychotherapist Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)
  • 3
Feb 26, 2014 - 10:14am
torchic, what's your opinion? Comment below:

maybe see how much funding they've received and how much is lined up for the next few years

all startups look "promising", but for a lot of them, once you're in, you'll realize very quickly if the idea is fundamentally flawed

speed boost blaze
Feb 26, 2014 - 10:50am
torchic, what's your opinion? Comment below:
dew2229:

start-up! who cares if it fails? you're still young. now is the time to take a risk and do something a hell of a lot more meaningful and exciting than turning comments on a powerpoint deck at 2AM.

and make sure to get equity.

quick question: I have 20% equity stake in a failed startup - does this justify me cashing out for ~$450mm ?

speed boost blaze
Feb 26, 2014 - 10:59am
Matthew, what's your opinion? Comment below:
dew2229:

start-up! who cares if it fails? you're still young. now is the time to take a risk and do something a hell of a lot more meaningful and exciting than turning comments on a powerpoint deck at 2AM.

and make sure to get equity.

20% of a company worth $0 is $0.

Would rather pull in $140k in my first year out of school.

Feb 26, 2014 - 12:10pm
dew2229, what's your opinion? Comment below:

I'd still rather take the risk on a start-up where I have more direct control over the outcome than work for a banking group that is, and I quote, "doing terribly and there is a possibility it will go away in the coming years". seriously, youll do nothing but pitchbooks and be incredibly miserable. If there were solid deal-flow, at least you'd get something useful out of the job.

And yes, I'm well aware that equity is useless if the company fails, but zero equity in a successful start-up while you're slaving away at a suffering ibank group is also useless.

Feb 26, 2014 - 4:22pm
noiven, what's your opinion? Comment below:

as some people have already suggested, it really depends on 1) the details of these start-ups -- i.e., name, space/market, mission, product, founder and employee backgrounds/bios, # people, fundraising status and investors, stage, users/customers, competitors, growth, whether they're looking to sell or trying to go big, etc. 2) whether you actually know anything about tech/start-ups and want to be in that world/in VC vs. in banking or at an LBO shop or somewhere else, and where geographically you want to be, and 3) what the role is (engineering, product, biz dev, marketing, sales, ops)

happy to help if you PM me or whatever

Best Response
Feb 26, 2014 - 4:51pm
SSits, what's your opinion? Comment below:

Key question is where you are in life and what level of job security vs salary vs risk you can tolerate.

Looking to get married soon to a dependent lady who wants to pop kids? Go for the IB for better job security and compensation.

No attachments or attached to financially independent partner, or you have accumulated a strong cushion of savings? If I was in your position, I'd go gamble on the VC for a few years on the basis that the opportunity cost/impact on your other priorities is not as great.

There's more factors like this eg where you want to get to in life, how old you are.

If you're sub-30, I'd recommend the start up even more. You have plenty of life left to get back 'on track' and you'll be richer for the experience - as will your resume. I didn't become a commercial banker until I was 33. A lot of good, well paid bankers I work with lateraled in from other careers (eg engineering) in their 30s. The idea that you have to get into and stick with one career path as soon as you're out of university is a self-delusion.

Without any information on your risk tolerance and the opportunity costs you face, it's impossible for anyone to give you meaningful advice on the choice.

Those who can, do. Those who can't, post threads about how to do it on WSO.
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  • 1
Feb 26, 2014 - 5:09pm
IBExec91, what's your opinion? Comment below:

I have done the technology startup route and know it well. What will you do for the startup entry level sales? Depending on the stage of the startup, I doubt there is a meaningful opportunity on the financial side of the business. And if it is on the financial side it is probably advance administrative work. I continually hear about bankers wanting to pursue startups. They see the huge valuations and think they can make millions fast. Well most startups fail. And even the good ones do not hold their value long enough for you to vest your options and cash out. Picking the right one is extremely difficult. If you are joining one that is highly touted you will not get enough shares to make up for the $75K per year loss of income which adds up. They good one have smart investors/VCs. They are not giving a recent college grad enough shares to make even a $1M on their stock. If you have the opportunity to work in IB even at a sub par firm, it is a significant accomplishment. Most recent grads don't get the opportunity. Startups are a lot of fun. Correction--successful startups are a lot of fun. being at one that does not crush it which is probably 99% (not kidding) then it bites as you see people at the few that do skyrocket. Working at a startup absolutely does not require the hours of IB. Only the founders and key personnel (which you will not be coming out of college) work crazy hours because they are looking at huge payouts. Bottom line, you can always go to a startup, but you cannot get back to IB from a startup.

Feb 26, 2014 - 7:47pm
noiven, what's your opinion? Comment below:

if you're joining a start-up because you think you'll make a lot of money, you have absolutely no business being there

Feb 26, 2014 - 9:47pm
chicandtoughness, what's your opinion? Comment below:
idontwearglasses:

What kind of entry level startup SF jobs are paying you 60-70k?

You'd be surprised. Obviously the devs will be paid that much (or more) just for breathing. Sales pulls in 40k-ish. I assume OP is talking about a startup that has gone through a few VC rounds and is hoping to scale up, not an early-stage.
Currently: future neurologist, current psychotherapist Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)
  • 1
Feb 27, 2014 - 10:07am
torchic, what's your opinion? Comment below:
idontwearglasses:

Obviously devs get a lot more and Sales pulls in 40k-ish, so again, what role is giving him 60-70k at entry-level?

cuz all start-up jobs pay the exact amount ppl r saying, no deviations whatsoever

inb4 startups r the next bulge brackets

speed boost blaze
Feb 27, 2014 - 8:25pm
noiven, what's your opinion? Comment below:

70k is about I would expect a post-seed or Series A-ish company to pay for a product manager, data scientist, or maybe biz dev (partnerships) in some cases. could also be an engineer salary for a super early stage start-up that knows it can't compete on price for good talent so they don't even try

Feb 27, 2014 - 11:19pm
IBExec91, what's your opinion? Comment below:

Sales comp for an entry level position for a startup is $30-40k base salary 2X if you hit your quotas. In this role be ready to dial and smile. Someone said you don't join a startup if you want to make money. Not true. You accept the risk and lack.of stability of a startup for the opportunity of a big payoff. Unfortunately entry level people do not receive enough stock.

Feb 28, 2014 - 2:20am
wikileaks, what's your opinion? Comment below:

IMHO if you don't think one of the start-ups will be sold, I`d go with banking. More secure, and as many mentioned you can go back to tech after.

Feb 28, 2014 - 2:21am
anonymhomo00, what's your opinion? Comment below:

IB or founding Startup (Originally Posted: 04/25/2017)

First of all, I'm not a troll and I'm well aware that this might sound totally fucked up.

Anyway, I got admitted to yale and after talking to some other students the path of starting your own business seems extremely interesting (not only financially). I'm basically thinking about (I know this seems ridiculous) innovating the prostitution, porn and nightlife industry. But I'm afraid that if I fail I will never be able to get back on the IB and PE track. So to sum it up, would you guys just follow the typical IB/PE routine or take the risk and found a startup?

PS: I know that I have 4 years left, however, I'm just interested in the possibility.

Feb 28, 2014 - 2:22am
Frisbee, what's your opinion? Comment below:

Get VC funding first, then come back here. If you're serious about doing a startup right now and if it takes off, kiss IB goodbye.

If you do IB first, a startup is still definitely possible.

Feb 28, 2014 - 2:23am
anonymhomo00, what's your opinion? Comment below:

Does yale teach me how to set up a fundraiser? Or how to develop a business plan? I mean there are probably some people who could help me out, but I'm afraid that they might get confused. Do you guys have any ideas where I should start?

Feb 28, 2014 - 2:25am
Gangster Putin, what's your opinion? Comment below:

I don't know why you're asking this question. If you have just an idea and no business now, spend some time working on building your business (you should have time to do this in college) and then we can have this conversation. An idea with no execution behind it is worthless.

Feb 28, 2014 - 2:26am
My Name is Jeff, what's your opinion? Comment below:

Why don't you apply to the Thiel Fellowship? Pretty sure Peter would be very interested in finding out how you're going to disrupt the porno industry.

GoldenCinderblock: "I keep spending all my money on exotic fish so my armor sucks. Is it possible to romance multiple females? I got with the blue chick so far but I am also interested in the electronic chick and the face mask chick."
  • 2
Feb 28, 2014 - 2:29am
vangjac14, what's your opinion? Comment below:

Hustle the start up! Worked in REPE / Development meanwhile starting my first company. Launched my second venture two weeks ago with several client accounts and a pipeline in the dozens. You'll be plenty fine if you ever want to go back into finance - regardless of what people say, decision makers value the risk you took and the value you bring to their organization after having your hands in every part of your startup much more than someone that is extremely good at just analyzing data and building models. I do agree, don't do it unless you have pre-commitments in sales or some other pre-revenue cash flow guarantee that will ensure the viability of your business - you have three months, go hustle!

  • 2
Feb 28, 2014 - 2:30am
xgozax, what's your opinion? Comment below:

This is why ivy leagues are fkd

Let me hear you say, this shit is bananas, B-A-N-A-N-A-S!
  • 1
Feb 28, 2014 - 2:36am
henrik_lundqvist, what's your opinion? Comment below:

Startup vs. IBD (Originally Posted: 04/30/2012)

Did some searching on this topic but didn't find anything related. I could really use some advice.

Situation: -Graduating in May -Internship in IBD -Accepted FT offer from IBD (training starts this summer) -Executive / Managerial Offer from tech startup (starting immediately). Startup is being created by serial entrepreneurs/investors and has market potential (It's not a transformational idea, i.e. Facebook, LinkedIn, Curing Cancer, etc.). It also has early-stage VC advisory at the moment but no investment.

There is more to it but this is all I am willing to share for brevity / privacy.

I think this is a great opportunity, but I am also looking at the many downside cases if I take the start-up job. If I take the start-up job and it fails in 6,12 or 18 months, will I but cut off from the banking world? If I need to find a job as an analyst, will they even bother to take a look at my resume? How would you look at 22-23 year old with this story in an interview?

Any feedback would be greatly appreciate. Thanks guys.

Feb 28, 2014 - 2:37am
SonnyZH, what's your opinion? Comment below:

I'd go with the FT offer, mainly due to them not having received VC funding yet. The odds of this start-up turning out very profitable (at least in the short-run) are extremely low in comparison to you having a safe ground and excellent exit ops as an IBD analyst into PE/HFs, for example.

[quote]The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.[/quote]
Feb 28, 2014 - 2:38am
BTbanker, what's your opinion? Comment below:

The failure rate for VC backed companies is between 20-30% depending on what tier of VC firms you are looking at, but I would also pick the FT offer. Work there for 2 years, and then decide on whether or not banking is right for you.

Feb 28, 2014 - 2:39am
gf1990, what's your opinion? Comment below:

Do you believe in the startup? I would take the startup only if I truly believe in the idea and wouldn't mind spending the same time in it as I would in a IBD job. Also the name of the bank would matter a lot too.

Feb 28, 2014 - 2:40am
casualgamer, what's your opinion? Comment below:

Startup or I-Banking Route? Which would you choose now? (Originally Posted: 05/14/2016)

If you had the chance to intern and later on get a full-time offer at either a startup (that you truly believe in, and feel like it will hit big in the next 5-10 years), or a bulge bracket bank, which would you choose?

I have been hearing and reading how investment banks are struggling and about the recent WSJ article how more M&A deals are being done without bankers.

*Mainly asking this question because I am interning at a startup this summer in Silicon, but I have always wanted to be an investment banker... now I am not so sure.

Feb 28, 2014 - 2:42am
QGKZ, what's your opinion? Comment below:

It depends on the position within the startup. If you're one of the scientists/engineers or salespeople, then the startup would likely be a better fit and choice overall. If you're a business person, then banking would be the better choice.

Feb 28, 2014 - 2:44am
casualgamer, what's your opinion? Comment below:

@Predilection" QGKZ

I definitely have more finance-related skills since I am a Finance major at a target school for banks, but I've been looking hard into startups and Silicon because of the chance to hit it huge. Needless to say, I don't have lot of experience in tech and coding, etc.

I am a rising sophomore, and my position at the startup is Prod Dev, Sales & Marketing.

Feb 28, 2014 - 2:45am
MonkeyPoop, what's your opinion? Comment below:

Investment Banking. You have a high fail rate for a StartUp if you somehow did not get funding. Do not be dis-illusion about a StartUp, it is just another company being formed (unless we are talking about engineering and machinery parts). If I got the opportunity to do the same, IBD is far the best choice.

http://www.wallstreetoasis.com/blog/why-you-should-reject-that-start-up-job

This thread will work.

Feb 28, 2014 - 2:47am
Banker24, what's your opinion? Comment below:

Regional I-Bank vs. Start-up (Originally Posted: 03/22/2010)

I have been working at a pre-cash flow start-up for about a half year. Recently, I have been approached by a few boutique i-banks I applied to over the summer. I am currently trying to decide which option to pursue. I am building strong connections while working at the start-up (Multiple top b-school alumni). However, the pay is extremely sub-par and while I will receive equity, the cash out is probably further than sooner. The boutique I-Banks are very small (8-12 people) and therefore I am worried about the prestige factor when applying to business schools, PE fims etc... Any insight on what exit opportunities there are for small regional banks (industry focused) with only one or two MD's. Anyone been in a similar situation to this? Sorry for the lack of information, but any advice would be greatly appreciated.

Feb 28, 2014 - 2:48am
ilikebanking, what's your opinion? Comment below:

I'm all about entrepreneurship, if you think there's opportunity to be had at the start up, even down the line I would stay. Not only will you be working a quarter of the IB hours but you will also be making much more if it takes off.

Feb 28, 2014 - 2:51am
thenaner, what's your opinion? Comment below:

Continue with Startup or Continue with IB job? (Originally Posted: 02/13/2016)

Currently a senior at a non-target LA school. I accepted an offer at a MM IB in Chicago starting this summer, but I'm currently working on a startup that is beginning to gain traction. No funding yet, no LLC or real product/sales yet but we have investors interested. We are entering a Bplan competition pretty soon and depending on how we finish, we may or may not continue on. Say we win the GP; get some investors interested and things get real: Should I ditch the offer and keep going with this or take advisory role within the group?

Feb 28, 2014 - 2:52am
GuyFawkes, what's your opinion? Comment below:

What kind of a startup? I wouldn't go throwing that offer away yet, getting funded is a lot trickier than it seems. Also, it might not hurt to have some IB background before going in front of the VC sharks.

Feb 28, 2014 - 2:54am
das_king, what's your opinion? Comment below:

Start-up verus Finance. (Originally Posted: 07/13/2007)

Hi,

I am in college right now; a non-target school in the middle of no where. Very few if any graduates get into i-banking, I went here because of a couple mistakes senior HS that resulted in my admission getting revoked to other top colleges. I literally flunked out the last semester of my senior year due to excessive drinking, partying, and others.

However being incoming sophomore to college, I am having a 4.0 so far and have start a part-time small business. Note, I am not an internet whiz, nor did I start something that is going to blossom into the next facebook, i just had a few hundred dollars and took that and made it into a solid retail business.

There are very few investment companies around that offer internships but there are a ton of other colleges in the area; some of which are MUCH better than the one I am attending right now. But the business I am running on the side helped me gain a lot respect and I was able to get a lot of interviews and was able to secure internships.

Now obviously the internships are not a cake-walk and I am devoting a lot of time to them since I am competing against interns from other top schools that are much better equipped education-wise.

I am deciding whether I should keep doing my start-up or focus on my internships? Both are very time-consuming and I cannt do them both. I am make about 6-70k a year from the start-up.

Feb 28, 2014 - 2:55am
Restructure This, what's your opinion? Comment below:

Depends what you want to do. You didn't specify what kind of internship. I'm assuming the internship is impressive enough and will move you closer to your goal.

If the point of the business is to gain extra credibility, you've already gotten that benefit. It's on your resume. Will running it for another year enhance the appeal on your resume? If not, shut it down and focus on your goal.

The ultimate coup - if you can do it - take on a partner or employee that you trust and have them run the business while you work. That will teach you some lessons about managing/delegating (not easy), and will impress anyone IF you can pull it off.

  • 1
Feb 28, 2014 - 2:56am
gweilo, what's your opinion? Comment below:

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Feb 28, 2014 - 2:57am
dosk17, what's your opinion? Comment below:

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