Do you want to get out of banking? Do you want escape the seemingly secular decline in jobs and/or pay? What is it honestly like to emerge from the shelter of a large organisation and kick-start a start-up? We’ve spoken to 4 ex-bankers who’ve become entrepreneurs. They are, mostly, very frank.
1. Name: Joe Nelson
Now: CEO of TheyFit, a custom fit condom company
Previously: Algorithmic salestrader and executive director at Goldman Sachs
“You hear loads of stuff about entrepreneurs who leave banking and go off to become farmers or whatever, but my impression is always that most of these people have made their money and are able to walk away without any of the real world considerations like paying a mortgage. It’s always a bit frustrating when they then stand up and make a big stand against the banking industry.
Personally, I spent ten years working at Goldman Sachs after studying at the University of Cardiff. That I was there at all was a bit of a surprise – my father was a plumber and I come from South Wales. I used my student loan to do some trading, which got my CV noticed by Goldman. I got an internship and got a job there.
I did alright out of working at Goldman, but I didn’t earn enough to retire. I’m not one of those people who never has to work again.
I had the idea of setting up TheyFit while I was still at Goldman. They’re very paranoid about anyone having any outside interests so I had to put my proposal to their investment committee, which is like a weird episode of Dragon’s Den. Goldman being Goldman, they have a weird clause which says that if the investment committee likes what you want to invest in and allows you to go ahead, they must have a right to request the same terms as you. This can make life difficult. For example, if you want a 10% stake in something and the owner doesn’t want to sell another 10% stake to Goldman, you’ll have to reduce your stake to 5% so that Goldman can have its share.
I went to the investment committee and said – ‘I’ve got this hilarious concept for custom fitted condoms, it could be a real game changer and encourage people to have safer sex.’ Unfortunately, they were up in arms about it and refused to let me be associated with it. I tried appealing, but they declined again.
At that stage, I had a choice – I could drop the idea altogether or think of other ways of pursuing it. I decided to set up a new company with my brother Sam acting on my behalf – I’d invest through him. However, as the launch date approached in September last year, I started to have second thoughts. I was turning 30 and I guess you could say I was having a mid-life crisis. I’d been at Goldman for 10 years and setting up a company by proxy – run through my brother – seemed a half-arsed way of doing about things. This had already been a back-project for 5-6 years by that stage and it seemed the only way of doing it was to do it full time.
This is the point at which most people lose their bottle - they want the certainty of the salary. Maybe they’ve got a mortgage, car finance, credit card bills – they’re locked into the cycle of getting paid at the end of the month. People will do that for 40 years and then retire – and that’s fine.
I had a lot of conversations with Joanne, my long term partner, and then resigned. When you resign from Goldman you get 3 months’ gardening leave and that was the hardest part. Those 3 months were a remarkable period of self-doubt. It consumed me. I’d wake up in the morning wondering if I was doing the right thing, I’d eat lunch wondering if I was doing the right thing, I’d go to bed wondering if I was doing the right thing, and it would be the same the next morning. It’s really, really difficult. At one point , I caved in and did some consulting for a few weeks.
Throughout that period, Joanne was a rock. You really need someone as your support to help convince you that although you’re outside of your comfort zone you haven’t made the wrong decision.
TheyFit launched in December and it’s going really well – helped by some major publicity in the national press. I have no plans to go back to banking. If I could give advice to anyone who’s sitting in a bank and thinking they’d like to get out and set up their own business, I’d say you can worry and worry and worry or you can jump in with both feet and really go for it. It’s better to try and fail than not try at all.
It’s obviously more difficult if you’ve got dependents. We don’t have any children. I know people who are looking after siblings and older parents and putting people through university. With money comes responsibility. You get locked in. “
2. Name Barry Hampson
Now: Owner of Nuvo, artisan sandwich bar on Cannon Street
Previously: Head of equities product control at Dresdner Kleinwort Benson
“We’ve been open for eight years now, so I’ve been doing this for a while. If you’re in banking, you don’t realise how difficult life outside can be – especially if you’re in the food sector. The food business is amazingly complicated. - More complicated than you would ever imagine.
In the first place, you’re often dealing with staff who don’t speak English as a first language. Basic communication can become an issue. You need to be very careful about understanding and interpretation. You also need to have very well defined procedures in place if you want your business to be able to operate in your absence.
In banking, you’re mollycoddled. If your computer breaks, you call someone and if they don’t come and fix it you phone them up and shout at them. If you’re an entrepreneur, you have to take responsibility yourself.
I got some investors to go in with me when I started out – a couple of friends who were already in the catering industry. It was much easier then.”
3. Name: Prefers to remain anonymous
Now: Serial entrepreneur
Previously: Trader at a major British bank
Age: Mid 20s
“Everyone just wants to get out of banking now. No one’s getting paid any more and they’re all fed up with it. They’re also paying a lot of tax on what they do earn – if you’re an entrepreneur you can benefit from the Enterprise Investment Scheme and pay tax at a far lower rate.
I resigned from my job in banking last year and have now got two companies that are live. I guess it was quite easy for me to get out in the sense that I don’t have any children. A lot of the people I worked with are keen to exit, but they have large mortgages and school fees- they’re tied in.
I went into banking with a view that it was all about gaining experience and contacts and having the ability to come up with money-making ideas in a niche sector. Spending time in banking is great to the extent that it gives you a pool of former colleagues who are all keen to become investors – everyone wants to diversify out of banking and several of my ex-colleagues have backed my businesses.
How long do you need to go without an income? I’ve heard some people say two years, but for me it was only six months before one of my businesses started to pay.”
4. Name: Ian Hart
Now: Owner of Sacred Spirits Company
Previously: Headhunter of quants and derivatives trader at Lehman on Wall Street
Age: Mid 40s
“You could say that I’m battled-scarred as an entrepreneur. In the late 1980s and early 1990s I was studying clinical medicine in London whilst running a company which sold around 25% of all the telephones in London. It was very successful, but also highly leveraged and when customers started having bad debts, it caused me to go bust.
When the company went bust, I knew I had to do something quite drastic, so I went to study financial mathematics at the University of California. From there, I went into derivatives arbitrage and got a job on Wall Street.
After Long Term Capital Management went bust, I moved to the UK and set up as a headhunter recruiting mathematicians and financial derivatives quants. That was fine until the year before Lehman blew up, at which point the world froze over.
I sat down and decided that my last 15 years of enterprise were over: I needed to start from scratch. At first, I became very interested in microwave circuit board engineering – I wanted to make a handheld radar system. I taught myself how to build the circuit boards on the computer and emailed my designs to a factory in China which would send me back the components. However, it didn’t work out – I kept blowing radio frequency transistors. Having worked all day on the project for a long time, I decided I needed to drop it and move on. Other microwave engineers told me I’d need to go to university for at least 5 years in order to master their field – microwave electronics is a dark art.
I’d always thought Bordeaux wine could be re-engineered in a different environment and for a while I contemplated going into that, but then I realised that gin seemed more suited to London. London dry gin originated here and there were once 1,500 distilleries. Now there are only 4.
That was 2008/2009. When I started out, I had to decide whether to run the company with leverage or not. I decided not – people offered to put money in but I politely declined. When you take money from external investors you still have a boss. Instead, I’m funding the Sacred Spirits Company myself. So far I’ve put in £200k of my own money. The main advantage is that I’m not answerable to anyone – I have complete autonomy and that’s very valuable. I intend to fund everything organically through my own savings. I’m going for a leisurely pace of growth rather than breakneck expansion. I’m battle-scarred from the phone company – you could say I’ve lost a few fingers and I’ve got an eye patch.
I’m in my mid-40s. I used to have a house but it was lost through divorce. I’m now living in the family house. If you’ve got a £1.2m house, you could always borrow against that as collateral, but I don’t have that option.
The big difference between my life now and my life in banking is the physicality of it. In banking I was sitting there and tapping on a keyboard all day. Now I might have to wash out cans of juniper or deliver 18 bottles to a bar. I always found it strange in the past that people were sitting at desks and tapping on computers instead of chucking around pitchforks of hay.
Having said that, we do have a warehouse that runs from a computer system, so there are still parts of my role which are behind a computer screen. We were recently in the US for a few weeks and I was able to arrange for deliveries using this automated system – we’re starting to emerge as a global business."