Q&A: Technology IB Analyst

ted2020's picture
Rank: Monkey | 60

Second year tech IB analysts at a BB bank. Happy to answer questions about recruiting (interviews, networking, applications, resumes, internship experience, etc.) or the job (culture, types of deals, favorite/least favorite piece, etc.).

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Comments (29)

  • Intern in IB - Ind
Jun 26, 2020

what are the tech specific technicals you test / were tested on when interviewing? I previously interned in tech banking (boutique) but didn't get asked any industry specific technicals - looking to upgrade to MS/GS tech so any advice would be great

Jun 28, 2020

I interviewed for a general offer and then went through a group placement once I received the offer, so I never got asked any tech-specific interview questions. Common tech specific topics that you could get asked, though, would be questions about LTV/CAC ratios, net retention rates, churn, when to value on revenue v. EBITDA, growth rates, difference between booking and billings / how deferred revenue plays into this, annual recurring revenue (ARR), and things of that nature. Many of those metrics are pretty SaaS specific but can be helpful for much of tech.

Here are a couple of useful links for many of these metrics:

https://a16z.com/2015/08/21/16-metrics/ https://a16z.com/2015/09/23/16-more-metrics/

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  • Intern in IB - Ind
Jul 4, 2020

Awesome stuff bro! OK, perfect, appreciate the heads up on this stuff.

  • Prospect in IB - Gen
Jun 26, 2020

how did you figure out you were interested in tech IB? typically tech is often a sought after coverage group because people think they're working on the next apple or google etc, which likely isnt the case. what were your motivations in doing tech IB over other groups? what have you disliked most about it?
Additionally, do you feel like buyside exits (if you're interested in that) are limited to tech-specific PE or HF investing?

Jun 28, 2020

I figured out I was interested in Tech IB mainly from talking to many people in IB, though I also had an interest in tech much of college. Another big piece for me was the people / culture of the group - when I met the people in the group at the time I really gelled well with them. Those facts along with knowing that tech opened many doors after IB (PE, HF, GE, VC, Tech Corp Dev, startups) are what pushed me to tech.

The biggest frustrations I have had are the inefficiencies of IB at times, though that is not limited to tech.

In terms of exits, you're not limited to tech-specific (we have ANLs in our group going to a variety of PE funds) though it does leave that option open.

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  • Prospect in PE - LBOs
Jun 26, 2020

why growth equity next?
have you struggled with understanding the technical complexities of a client's product? or do you feel pretty disconnected from that in banking?

Jun 28, 2020

I wanted to do GE since I wanted to work with smaller companies and be able to be more operationally focused / create value through company growth instead of only financial engineering. I like that GE is in between VC and buyout PE, so you still get the modeling experience but it's a bit more qualitative / business model-focused than buyout. I also really liked the people at the fund I'm going to.

We don't get a ton of exposure to the actual technology in IB, which is a side that I'm interested in. So yes, we're pretty disconnected from the actual tech/products and much more focused on the financial side. That's another piece I'm hoping is a bit better in GE.

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  • Intern in IB-M&A
Jun 26, 2020

How difficult is it to recruit for non-finance roles at tech companies? Bizdev, product, corp dev, are those generally available?

Jun 29, 2020

It depends role to role and company to company, but it's definitely possible to do non-finance roles at tech companies (though it might take a bit more effort/networking depending on the role). Corp Dev is the most similar to banking in terms of skillsets and the most common path for someone going from IB to tech. Bizdev is doable, though the skill set required is a bit different than banking. Product is probably the hardest transition of the roles you mentioned. Though banking is helpful with the strategy side of a PM role, we don't get exposure to engineering / UX / data science which are all important for most PM roles. That's not to say it can't be done, it would just take some extra work.

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  • Intern in IB - Gen
Jun 26, 2020

Could you shed some light on valuing a SAAS company? Where could I find metrics/tweaks that are specific to this that deviate from a typical DCF/Comps?

    • 1
Jun 27, 2020

Following!

Most Helpful
Jun 29, 2020

Valuing a SaaS company doesn't deviate too much from valuing a company with a different business model, though there are certainly some intricacies (as with any type of company) and some metrics that are important to look at in tandem with valuation.

In our group, we hardly ever use DCFs to value a company since there are just too many assumptions that go into it / not many buyers see it as a credible valuation metric. Comps are usually our go-to valuation metric - usually public comps first and then acquisition comps. One difference is that many SaaS companies are valued on revenue multiples instead of EBITDA since they are many times not profitable / mature enough for EBITDA. Revenue growth (particularly ARR growth) is also heavily taken into consideration by buyers and investors - there is typically a correlation between growth rate and valuation multiple.

Some other SaaS specific metrics investors look at are: LTV/CAC ratios, net retention rates, churn, bookings, and billings. Here are a couple of useful links for many of these metrics:

https://a16z.com/2015/08/21/16-metrics/
https://a16z.com/2015/09/23/16-more-metrics/

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    • 4
Jun 26, 2020

With such shamless reporting of your mentor status, dobut people will sign up for you.

IB Analyst" />

Will update my computer soon and leave Incognito so I will disappear forever. How did I achieve Neanderthal by trolling? Some people are after me so need to close account for safety.

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    • 1
Jun 27, 2020

How does recruiting into tech group work at your BB? Do you have to come prepared knowing about deals in the space during the interview rounds when recruiting for the firm or do you get placed after you get accepted?

Jun 29, 2020

For our bank (and I believe most BBs) you go through a general interview process and then, once you get an offer, you go through a separate group placement process. For this reason, I didn't get any tech-specific questions in the interview, though I did talk about tech since I had been following what was going on in tech at the time.

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Jun 27, 2020

Thanks for doing this! How did you go about answering the question: Why Tech IB?

Jun 27, 2020

you still looking for an IB job after not going to med school?

Will update my computer soon and leave Incognito so I will disappear forever. How did I achieve Neanderthal by trolling? Some people are after me so need to close account for safety.

  • Intern in IB-M&A
Jun 27, 2020

Bro you down to 1v1 in the Gulag?

Jun 27, 2020

yerrr

Jun 29, 2020

When I was asked this, I mainly talked about my interest in tech and talked about certain deals / trends that had been happening in the space to show that I was following what was going on. I think showing interest and a curiosity to learn is huge when asking about sector interests.

Also, on a more personal level, I also talked about how much I liked the culture of the tech IB group I was looking to join. Working with people you like in IB is huge.

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  • Intern in IB - Gen
Jun 27, 2020

following

  • Analyst 1 in IB-M&A
Jun 27, 2020

following

  • Prospect in IB - Ind
Jun 29, 2020

A couple related questions mentioned previously but, would really appreciate an insight into the below, thank you.

1) could you provide an overview of the main different sub sectors / verticals within Technology and cover an overview of what they are and how they differ from one another? E.g hardware vs software vs SaaS etc..

2) Also could you explain the differences between how the financials will differ e.g which verticals/sub sector you'd expect to have high EBITDA margins or net income margins vs low and why; and which would have higher deprecation and why; recurring revenue differences etc.. and also whether you think any sub sectors / verticals are more likely to be loss making at the start vs another vertical and why

3) could you go over how valuation would differ between these verticals / sub sectors (if any difference in valuation at all) and offer an insight into the key metrics/ratios that are most common/important for each of the sub sectors and why

Thanks!

Jul 1, 2020

Thanks to OP for doing this Q&A!

1) Breakdown of the kind of work your group does (M&A / ECM / etc)

2) What's most important in a DD for tech deal? What are some common deal-breakers in a tech M&A?

3) What type of modelling work most common at tech groups?

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  • Intern in IB-M&A
Jul 4, 2020

$79 for a coffee chat. Jeezzzz bro

  • Intern in IB-M&A
Jul 4, 2020
Comment
  • Intern in IB-M&A
Jul 4, 2020