If you leave the hedge fund industry after 2 years to start your own company, how hard is it to go back into the industry assuming the startup fails? Suppose you did 2 years banking at a great group then 2 years at an elite hedge fund. I am considering starting a company, but want to understand what the downside case really is.
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also does the answer change if i spent another 2 years in the industry before leaving?
If you have a noncompete you’ll be able to break in easy.
What do you mean?
You could justify your years as a failed startup founder as being under a noncompete
Better to have a very plush cash cushion.
How much of a cushion should I have? Like how many years of burn would you personally want to have? I know it varies, but I am wondering what most people would do.
Better to be progress at current job and save at least a million aside from the startup investment. Otherwise too risky financially. Also will the start-up be in the finance sector? I am starting my own fund.
holy shit what's your rationale for 1 million. that's so much! how many years of run-way are you assuming. if it helps, I would probably start a company that only requires sweat equity / VC backing and not a ton of my own money (not trying to start a hedge fund, but i agree that 1mm of personal money is what's necessary for starting your own fund).
i've saved like 250k in my personal savings and another 200-300k in accounts i have locked up and can't touch. i grew up pretty middle class and don't have expensive tastes, so I could live off of that for years.
It's not about the living expenses. It's about making use of the situation that's currently working and has allowed you to prosper from middle class to half a mil. saved. When you get at a good utility level of the current opportunity like a few promotions then you can move to a start-up.You are moving from a dream career for most students on WSO to uncertain, no fixed income situation. It's only my personal conservative perspective after having tasted the bitterness of failed startup in the past. Reality starts to feel very real, then you start thinking, and that's when you know that you are ..........!
Yeah that's true. It's a dream career for me, but I also hate working for other people. I see the point of milking it while I can though. FWIW, nearly every friend I have suggested I do it for another 2 years before quitting.
Working for yourself is tougher. You don't the same structures and supports to keep you disciplined and accountable. Atleast in my personal experience, I got a bit lazy after the initial rush and excitement phase.
So true, i think the "best of both worlds" I am considering now is to take some time off to read and learn from books about basic startup job skills (marketing, basic legal / admin stuff, how to design products, general theory on what's makes startups successful), then maybe work again for 1-2 years at a HF while doing basic work on a startup on the side. Hopefully, I get some basic traction and can quit with that. If I don't get traction, then at least maybe I learn some stuff along the way. I have noticed from crawling through LinkedIn that ex-HF people that start companies tend to do it after ~4-6 years of total post-college experience and that in nearly all cases they do not return to the HF industry. If these folks go back into investing, what I've noticed is many go back and do some kind of VC or angel investing. There's some famous exceptions. Not that this would apply to me in any likely scenario, but Peter Thiel started his macro HF after leaving his job as an options trader and using money he made from Paypal. It's unlikely, but the dream scenario where I do re-enter the industry would be to do something that fits that general fact pattern (try to start a successful company and if I can sell it use the proceeds to start a modest investment firm, though not necessarily a hedge fund).
My hunch is unless you have a really strong network and can easily source via said network might but kinda an uphill battle. I'm sure its doable but not a slam dunk. For starters you wouldn't have that much experience so its not like hiring a once expert with a proven track record. You'd also have been out of the flow for a while, which certainly doesn't help. The potential benefit on the lack of experience side is that you'd be coming in relatively junior so expectations could be lower. That said still going head to head with someone in the flow. I'd rather hire someone currently on a desk that knows whats topical that someone that hasn't been in the game for a couple of years.
All that said, if you're really passionate about the startup go for it. Too hard to hedge out career risks and after a few years you probably wouldn't want to go back to stock picking anyway.
Makes sense, this is kind of what I would have expected. It sounds like I should only leave the industry if I am ok with the risk of not going back.
Your best bet is surely to go to a MM get that 2 year gardening leave, start your company and recruit if not successful? Would be quite easy to execute once you're onto a 2 year gardening leave. And hopefully you land in a pod that gets blown out quite fast.
Two year notice period? What do you mean? Surely the compete is not two years? Sorry I worked at a single manager so am not aware of these policies.
sorry tired after a long day - gardening leave*, some MM do apply them, I believe that Millennium is one of them?
I wonder about this question as well; if your startup is running the strategies you were at the elite HF you left, and your startup fails, why would anyone give you a job at another HF again? You've proven that you can't make it. You can't hide behind coworkers' success. The only way I can think of painting it is that you couldn't raise enough capital. Other than that, I can't think of a rationale you could present after you fail to get back in. I hope this isn't true but I can't see it any other way
startup wouldn't be a hedge fund. if i ever started a fund it would be with money from starting a different type of company. i think it's too hard to run a startup hedge fund. the only finance startup i would do with a very small amount of capital would be to sell sell-side research or to sell alt data maybe.
If you are talking about a startup in a totally different area than finance, I think it would not work against you if you wanted to come back to HFs. Especially if you could spin it so the startup experience gave you new insights into trading ideas.
makes sense. i wouldn't start a hedge fund though, because i doubt I'd be able to raise the funds to do that. i also think the economics of a small fund just don't work.
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