As the saying goes: any port in a storm. Plenty of ex-bankers have taken refuge in start-ups which promised to be a bright spot in a sea of redundancies and storm of shrinking compensation.
Start-ups talk a big talk in terms of upside. Large institutions are retreating from lucrative areas of finance, they claim. There is still a lot of money to be made in these areas, but it’s to be made from within a smaller, leaner and keener new business.
Typically, they can’t pay as well as established businesses in the beginning. But they offer equity participation which they say can turn out to be much more long-term lucrative.
If you’re a junior banker, with few liabilities – no mortgage repayments, no school fees, it’s easy to see why you might find this an attractive proposition.
Let me share with you my own experiences, which might make you change your mind.
I’ve been working for a start-up for a few years now, having decided that bulge bracket investment banking was not a sustainable lifestyle for me. Whilst the working conditions in my start-up are indeed much better, it has not cracked up to be quite the life-changing decision I had hoped for. Mainly, it’s just boring.
According to friends and peers I’m not alone. Several of them are going through exactly the same malaise. To make things worse, the slow period means few deals to add to my CV. This adds up to poor remuneration, without the credentials to make up for this loss of compensation.
I would have been satisfied to trade money for transactional experience. After all, deals are the main thing one talks about in job interviews. They are also a springboard to promotion. So my exit options from my current situation aren’t great either.
Compounding this, my network is gradually shrinking. This means that staying in touch with the job market is harder and harder, with few team members in a small business to talk to and socialise with.
Instead of actively sourcing deals, I have been stuck with boring business development tasks; networking lists, slides for investment consultants, daily morning conference calls with placement agents. It’s all pretty dull stuff, and I can’t help thinking it wasn’t what I signed up for.
However, I get the impression that my bosses are loving every day of their new lives as owners of their own fund. They get to talk about how great they are on a regular basis. A big part of their strategy to grow their business involves “spreading the word” which, essentially, means phoning up their mates.
It has to be said that they can also a) afford to wait (they're rich enough to never have to work again) and b) have all the eventual upside since they own the majority of the business.
In summary, I would advise anyone thinking of joining a start-up to consider their options carefully. It may not be quite what it seemed to be at the outset.
The author has worked in the City across a number of front office roles