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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
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/
Awesome stuff bro! OK, perfect, appreciate the heads up on this stuff.
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?
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.
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?
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.
How difficult is it to recruit for non-finance roles at tech companies? Bizdev, product, corp dev, are those generally available?
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.
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?
Following!
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/
With such shamless reporting of your mentor status, dobut people will sign up for you.
https://media0.giphy.com/media/116wwYf3ajIvrG/giphy-downsized.gif" alt="Q&A: Technology IB Analyst" />
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?
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.
Thanks for doing this! How did you go about answering the question: Why Tech IB?
you still looking for an IB job after not going to med school?
Bro you down to 1v1 in the Gulag?
yerrr
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.
following
following
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!
1) The main verticals we cover in tech are enterprise SaaS, FinTech, EdTech, Healthcare IT, business services, consumer internet, ecommerce, and payments. Our SF team also covers semiconductors. In NYC we do hardly any hardware - it's all mainly software and services.
2) It's hard to make too much of a distinction between these categories since there is a lot of overlap here, though there are some difference I'm happy to expand on. For EBITDA margins, margins are typically very high for software / SaaS businesses and much lower for services business given the higher costs of employing more people. SaaS models are typically all recurring revenue which investors love, whereas payments, consumer, ecommerce, and services have less predictability for revenue. Margins / being FCF negative or positive is a functions of how much startup costs are and how much money a company is reinvesting into the business to grow - this is more dependent on company stage rather than vertical.
3) Valuing any of these verticals is largely the same - using public comps, compsacqs, DCFs (less so) and LBOs. The biggest distinction is usually whether to use EBITDA multiples or Revenue multiples based on company stage in its lifecycle. I'd encourage you to read some of the answers above for more specific metrics.
Hope this is helpful! Happy chat further!
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?
1) Breakdown depends on what the deal is, what stage it is in, and how high profile the deal is. In high profile / larger deals, typically the tech group will do all the positioning (comps, compacqs, industry trends, company story) and the product groups will focus more on the M&A, IPO, etc. processes themselves. We work very closely in these situations. For smaller deals, sometimes we won't have a product team, so we will cover positioning and process specific work.
2) Common DD for tech is DD around customers, company model projections, churn rate, LTV/CAC ratios, code / technology reviews, Net Promotor Scores, TAM assessment, cultural fit, ongoing legal battles, and things of those nature. Deal breakers could be any of these things but often times it's because of a disagreement on price or major red flags like legal battles.
3) Common modeling work includes operating models, paydown / LBO models, DCFs, and merger models. These are what we spend most of our time on when modeling.
Hope this is helpful!
$79 for a coffee chat. Jeezzzz bro
you would drop $650 on a ps5 though sooo
What's split for fintech companies covered out of TMT vs. out of FIG?
We often work together with FIG on payments / insurance tech / broader FinTech deals. It depends on which group has a relationship with the company as well as whether it's more of a finance company enabled by technology (more FIG related) or more of a pure FinTech or even technology company expanding into finance (i.e. Apply Pay and Alipay).
Hope this is helpful!
Super helpful. Signed w/ FIG group for next summer and have strong interest in fintech. Thanks.
Thanks for doing this
Any resources recommended to crush a TMT interview ?
I wouldn't say there's too much that particularly TMT focused but some great resources are the Breaking into Wall Street 400 Question Guide and the Vault Guides. Beyond that, I would say just continue to follow what is going on in the TMT space in the news and make sure you have a focused, concise reason as to why you want to do IB. Good luck if you have an interview coming up! Happy to talk more if helpful!
Which of Barclays or CS do you think has a stronger tech coverage group and why? (Talking NYC primarily but broadly speaking across the US/to SF as well). Disregarding exit ops for now as im considering an associate role.
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