WSJ came out with this article yesterday (protip: read in an incognito window if you don’t have a WSJ subscription)
It talks about how banking has become less popular with MBAs, losing share to tech companies. I shared my thoughts in another forum but thought I’d drop it here in the investment banking forum as well. If anyone has questions, feel free to ask.
I’ve personally worked in both investment banking and at various high profile startups in Silicon Valley. I think there are definitely pros and cons to both.
From a learning perspective, you can learn a lot in both, just different things. The amount of learning you do in banking is truly like drinking from a fire hose (in a good way). You will become a wiz at financial modeling (very useful skill)), you rub shoulders with C-level execs of public companies as well as promising private companies, and you help them with the most important and strategic transactions for their companies (usually worth millions, if not billions of dollars). At a startup, there is a wider variance in terms of how much you learn. A lot of it depends on the company you join, the team you’re on, the boss you work for, and how hard you want to work/how much responsibility you take on.
From a compensation perspective, on average you’ll make more money in investment banking. I say ON AVERAGE, because again, there is a high degree of variance in tech. If you join Uber as an early employee, versus some other startup that flames out (the vast majority of them), it makes a huge difference on your financial outcome. The key is - do you know how to identify the winners before they become winners? Easier said than done. I’ve personally done pretty well in this area. The first startup I joined, my stock options ended up being worth multi-six figures after working there for just 1.5 years. The second startup I joined, my stock options ended up being worth seven figures after working there for just 15 months. The third startup I joined, the outcome is TBD because the company is young and hasn’t been sold or gone IPO yet. Certainly some of this is good luck, but I’d like to think a lot of it was also due to the fact that I started my career in investment banking, and then moved into private equity before joining the startups. I say this because 1) having the professional pedigree from Wall Street definitely opened up the doors for me in terms of getting the best companies to be interested in me, and 2) I’ve learned how to analyze companies from an investor’s perspective, and have a good sense of what business models are likely to work vs. not. Living in Silicon Valley now, I know plenty of friends who have worked for multiple startups and never had a good financial outcome. I also have plenty of friends who stayed in investment banking/private equity/hedge funds who are making upwards of $500k a year. So again, on average, you’ll make more money in finance.
From an impact perspective, there’s this idea that you’ll make a bigger impact working for tech companies. I think this is subjective. As a banker, you help companies with raising capital and advise them on M&A transactions. These are the types of transactions that can make or break a business. Without capital, companies go out of business, and jobs are lost. Talk about making an impact on people’s lives? If you work in tech, you can definitely work for a company that makes a highly impactful product (think Google, Facebook, Amazon, Netflix, Uber, Airbnb, the list goes on and on). But you also have to admit, there a TON of startups out there with stupid, pointless ideas. So again, it just depends.
I love tech, working in tech has changed my life. But if I could go back and do it all over again, I would still start my career on Wall Street, and then decide if moving over to tech is the right move for me. The exit opportunities from banking will always be available to me, and the world is my oyster.