We write a lot about people who’ve left investment banks for something else. Leaving banking for a tech firm, or a private equity fund, or a pet food company is the thing. Few people aspire to become partners at Goldman Sachs nowadays and banks’ HR people say the current crop of juniors are the most prima-donna-ish and difficult to manage they’ve ever come across.
So, if you’re one of the many, many analysts in investment banks who dream of doing something else, how long do you need to keep drinking the corporate Kool-Aid? Well….
If you’re looking for an inspirational example of someone who quit early and made a success of it, Ari Ratnakumar is your man. Ratnakumar spent a mere 13 months as an institutional analyst at Morgan Stanley in London before quitting to set up online graduate recruitment group Wiser. Four years later, he employs 35 people full time at an office in Central London.
Starting out in banking is good for two main reasons says Ratnakumar: firstly, you get great training. Secondly, you get the validation that comes from having a big brand on your CV. “Morgan Stanley gave me a very solid training foundation from which to start from,” he says. “And when I went out to raise money from VCs and Angel Investors, having the Morgan Stanley name on my CV was a huge reputational plus.”
Even so, 13 months in banking seems a little abbreviated. Like other young people in banking, however, Ratnakumar basically couldn’t wait to leave: “I was in my early 20s and I felt like I’d had enough training and learned a lot at Morgan Stanley. I had no family and no mortgage and I felt like I could go out and do my own thing, or stay for another 20 to 30 years.” He quit.
Antoine de Bausset, a former analyst at Goldman Sachs and founder of Hively UK, a smartphone app that helps people find service professionals like cleaners and baby sitters, describes a similar urge to move on after 22 months in M&A. “My decision to leave Goldman – and banking – was entirely unrelated to the firm or the role, but was because I saw Hively as a great opportunity which I couldn’t pass up and felt I had been well prepared for,” he says.
Even so, unless you have family money or easy access to investors, leaving a bank for a start-up before you’ve completed an investment bank’s analyst programme (at the very least) is going to be a risk. A Wharton study in 2013 found that you need to spend a full five years at a big brand name like Goldman Sachs early in your career if you want to reap benefits later on. Steven Schwarzman, founder of the Blackstone private equity group echoed this last year when he told a group of Harvard Business School students that the biggest mistake they could make would be to go out on their own after two or three years: “I have begged, literally begged — I’ve had people come over to my house on Saturday — and begged them not to do that, because they’re going to destroy their careers, because they’re not old enough yet, they can’t raise enough money yet, they don’t have enough credibility,” he said.
So, how long before you do have credibility? Schwarzman said there’s no rule of thumb: it’s all about the, “match between your maturity, your timing and that great market opportunity.”
On this basis, Ratnakumar, now aged only 26, seems to have got lucky. He admits as much. “Everyone thinks they want to run a start up, but what they don’t see is that out of 1,000 businesses you only get one or two that work – the failure rate is incredibly high. You get these young guns who think they want to follow the dream, but it’s hard out there and after about six months they fail.” He says Wiser succeeded because it had a strong founding team: “We had a good technical person, a good sales person, a good strategy person, and someone who gets things done and manages the money – me.”
Instead of running their own tech firms, Ratnakumar says most people who flee investment banks after a couple of years as analysts end up being CTOs or product managers. – They’re still in the start-up community, but they’re not exactly the technology entrepreneurs they aspired to be.
And if that doesn’t sound appealing? There’s always another alternative: you can stay in banking for 10+ years and become involved in the start-up scene as investor when you’ve actually made some money. Can you wait that long?