Would you leave a bluge bracket IB for a startup?

[Wallstyouth]

If given the opportunity how many would leave a bulge bracket investment bank for a small startup brokerage firm? I'm just trying to get a sence of the pros/cons of working at a startup financial services firm vs a large top tier bank.

 

[Andy Nguyen]

Hell yeah. They just have to pay more and give me "an offer I can't refuse" (just like a quote from The Godfathers movie)
But then again, nobody ever asked me this yet so I would just toil away until then

 

[alain]

If given the opportunity how many would leave a bulge bracket investment bank for a small startup brokerage firm? I'm just trying to get a sence of the pros/cons of working at a startup financial services firm vs a large top tier bank.

I don't know what your definition of a startup brokerage is but if you mean a small hedge fund, I would probably take it as long as I know the people and I trust their plan... or as Andy mentions, they make an offer that I can't refuse.

 

[EricFleming]

If given the opportunity how many would leave a bulge bracket investment bank for a small startup brokerage firm? I'm just trying to get a sence of the pros/cons of working at a startup financial services firm vs a large top tier bank.

this is not such a simple question. A start up means nothing is in place and proven through trial and error. It may not have the proper financing, in short, it's an unknown. If you do get "an offer you can't refuse" what you are getting is a premium for the career risk you are taking if it blows up.

 

[GusTsahas]

One very important point for anyone contemplating working for a small firm in any industry is to research the personality of the owners. Small firms tend to take on the personality of the owners, so make sure you research and learn as much as you can about their personal strengths and weaknesses in order to have an idea of what you are getting in to. In my opinion the second most important thing is to look at the growth prospects of the company and higher is better. The company should be in a growth sector, and growing at over 25% a year to ensure future career opportunities within the firm..... you don't want the company to stay small forever!

My best memories as an employee are when I started my engineering career at a crazy small company breaking into the telecommunications sector.... It was hard work due to the company doubling in size every year but for everyone able to handle the workload it was the best training you could get. The name of the start up? MCI Telecommunications, and now you know the rest of the story...

 

[gwkenny]

Hi.

I'm new here. Matter of fact, all of 15 minutes!!!! :P

But I just gotta say, "Where the hell are the quality posts?"

Rather than make innocuous comments or talk about how you must know the personalities of the owners (cause I know the OP already knows these folks, else he would not have gotten the offer. He also knows the personalities, cause it's got to be a Senior MD who is trying to pull this off and since the OP is an analyst at a BB then he knows that any given division/dept takes the character of the senior MD and this will carry over to the small institution) I'll try to add to the intelligent discourse.

OP: Since you've asked the question, I'm ASSuMEing you are taking this seriously, thus:

1) Make sure the firm is adequately capitalized. DO NOT BE AFRAID to ask tough questions. Where is the money coming from?

2) Does the contacts/work of the senior partners lend themselves to a small bank? Hedge funds are a bit easier if they already do this type of work. If they are starting a boutique IB in their specialty, it's a bit harder as being able to support issuance in the secondary market is very important and not having the ability/financing to do that will seriously inhibit their ability to get work. This has to be weighed against their reputation in the market. Some people are larger and life and Wall Street tends to collect more than it's fair share (as well as tons of assholes).

3) Ask who the Comptroller is and ensure that person is adequately qualified/experienced to handle all the crap that comes with compliance of a premier boutique firm (cause if this doesn't have that potential, then stick with the BB). This is very important. You want the seniors in the firm out getting business and if they don't have a competent comptroller they are going to get bogged down in crap. Even if they do have a competent controller, they will still spend a significant type with this stuff.

4) Weigh it against your personal situation. I'm assuming you are a second year. How do you feel your chances are of being bumped up to Associate? Are you one of those rare few who can do it without graduate work? Remember, all your gaining by going to MBA is a common paper most others have as well, and more importantly, the contacts you will make at MBA school. Personally, if you believe you will make associate (and you will know it if you are) then I'd tend to stay at the IB unless the offer is to good to be true.

5) Ask for the business plan. There are a select few I'd trust without the business plan. Examine the timeline. Is it viable? Your in IB, look at the business plan with the training you have received (and hopefully you aren't one of the analysts who learns nothing and is just doing crap sdc/graph work), see where it would be especially in 1-year and 2-years.

You're still young. If you aren't going to make associate, and you're in your second year, then you have to weigh the pros and cons of putting off or not going to MBA versus the experience you'll gain. If you are first year, I'd say that you almost have to stay at the IB.

6) Ask them about their staffing philosophy. What's their starting and ideal ratios of MD to Assoc. to Analyst.

All this is off the top of my head. If anything else percolates, I'll revisit.

It's an exciting time in your life! Enjoy it!



g-
gwkenny

 

[Christian]

Good advice Gw. However, before you enter a room and criticize the advice of people inside I suggest you find out a little about their background first.

 

[Yuriy]

But what if the start up goes bankrupt in 1 year? As Gus said, I would research the company and people who run it before making a decision. Unless it is my own start up

 

[alain]

But what if the start up goes bankrupt in 1 year? As Gus said, I would research the company and people who run it before making a decision. Unless it is my own start up

what if you get laid off in one year at your current job? Same thinking applies.

 

[VladimirBunicu]

what if you get laid off in one year at your current job? Same thinking applies.

I remember last semester at Baruch, Lawrence Simon and Bill Richards (not the last people in the Hedge Fund industry) were giving a talk and a piece of advice to Baruch students. Both industry veterans echoed: "young people must take the most risks, because in this country [taking risks] gets uppermost rewarded."
For the nick you chose on QN (Wallstyouth) you are the candidate for getting your risk-taking ambitions rewarded!
As I see it, working for a smaller company (be it a start-up hedge fund or a boutique IB) gives you more possibilities to learn a wide range of applications, and to grow your knowledge, experience and career, both vertically and horizontally. If the company successfully grows, you will be among the pioneers, staying on top. Again, I agree with the set forth below, you need to research the background of managers, check for criminal records if their previous undertakings were successful; talk with the people who already work for the company.

Things to watch out though:
I don't know how it works in a large corporation, but in a boutique company there is often no one to turn to for advice if you have questions, so you would need to figure out many things by yourself. Especially for a start-up, each member of a team (including the manager) is a trail blazer, who has to apply one's experience in order to discover and invent things anew. Considering you already have experience from your current job, I would go for the start-up.

 

[gwkenny]

Good advice Gw. However, before you enter a room and criticize the advice of people inside I suggest you find out a little about their background first.

Look, my understanding is that this is supposed to be a forum of quant jocks/wannabe quant jocks on Wall Street. If you can't stand the heat on a relatively anonymous (not withstanding the screen naming rules - which is admirable) forum, then yer not cut out for the crap you'll get on the street. If you aren't incredibly lucky to have a mentor run interference for you, you'll get chewed up and spit out in no time.

As for finding out their background first before commenting.... If George Soros went up and said something stupid, yes, because of his background I might take a second look to see if I missed something, but I'd call him on it. How do you think George would take it? He'd respect me. That's how it's done on the street. The way I do it may not predispose him to me, but he'll respect me however I do it.

All we have here are our words. If we can't stand behind them, why say them? In turn, if I say something stupid, I hope someone will point it out!!!

I could also turn this around and say, before you criticize me, shouldn't you know if I have had some sort of experience in the industry? I could re-iterate what I have done, but I feel my words speak for themselves and I don't need flaunt what I have done (or not have done! lol). In other words, my words speak for themselves!!!!! (now there's an ugly sentence)

For the nick you chose on QN (Wallstyouth) you are the candidate for getting your risk-taking ambitions rewarded!

Do you have experience on the Street? It really depends on his situation. If he's a first year, then this is a serious risk!!! Completing the 2-year analyst track practically guarantees you entrance to the very tip top MBA schools. Not completing the 2-year track, jumping ship to a startup that sinks, will not go well when applying to for graduate school, yeah there's a story to spin, but it's a lot easier just going the 'standard' track. The OP has got to balance the pros and cons and not just jump cause the upside he's got already is incredibly high and it's quite hard to find an opportunity with a higher upside!!!!!!

I don't know how it works in a large corporation, but in a boutique company there is often no one to turn to for advice if you have questions, so you would need to figure out many things by yourself. Especially for a start-up, each member of a team (including the manager) is a trail blazer, who has to apply one's experience in order to discover and invent things anew.

This is not a startup where everyone is new to the business. This is taking an existing business unit and making it standalone. Matter of fact, there should be no one "new" to the business. But yes, learning and figuring things out in the industry is a part of the process (just as if he was in a large organization). The supporting structure is what is different. A large part of that is the philosophy of staffing. That's the purpose I instructed the OP to ask for the MD/VP/Assoc/Analyst ratios. This gives him an idea of how much support he'll have, and in turn, how much support he's going to give.

Considering you already have experience from your current job, I would go for the start-up.

I guess folks are not familiar with IB. IB is a much different track than quant groups. I'm talking about IB groups like fixed income, healthcare, Petrochem, High-yield, agri-foods, etc....

You learn a lot as an Analyst, but then again, you don't learn much either! lol The first six months is really about learning terminology and the tools of the trade. The next year is about understanding how things in the industry work together. If the Analyst is REALLY good, then the last six months he/she can actually contribute valuable comments to the team: like make intelligent comments on disclosure or due diligence.

Now that's a very general statement. A lot depends on the group you are in and the chances you get but most importantly the Officers you are working for, but in general, an IB Analyst is a glorified secretary. This is a lot different than a Quant Analyst! Least from my experience with quant groups and IB groups.
__________________________________________________________

Now here's a challenge. Everyone keeps saying: "research the background of managers"; "research the personality of the owners".

How is the OP to do this? Not withstanding the fact that in all probability he works with these people cause that's how he got the offer.

Cause you know the bios in the back of pitchbooks are all glorified and pretty. So they don't help a hell of a lot.

So, how does the OP "research" the "managers" and their ability to be successful?

g-
gwkenny

 

[VladimirBunicu]

Do you have experience on the Street? It really depends on his situation. If he's a first year, then this is a serious risk!!! Completing the 2-year analyst track practically guarantees you entrance to the very tip top MBA schools. Not completing the 2-year track, jumping ship to a startup that sinks, will not go well when applying to for graduate school, yeah there's a story to spin, but it's a lot easier just going the 'standard' track. The OP has got to balance the pros and cons and not just jump cause the upside he's got already is incredibly high and it's quite hard to find an opportunity with a higher upside!!!!!!

Indeed a 2-year cycle with IB provides the "safety net" sufficient for further career moves. I have not had a chance to complete the cycle with IB even nearly, however this March it will be one year since I joined a small hedge fund. And it was not a start-up in a "startup" sense of it, rather a wealth management department, segregated from a boutique investment bank.
Your comments are very informative:smt023, please keep posting about the industry.

 

[gwkenny]

Indeed a 2-year cycle with IB provides the "safety net" sufficient for further career moves.

I'm intrigued. Can you please explain how a 2-year analyst program is a "safety net"?

What does "sufficent for further career moves" mean? In comparison to what?
___________________________

Again, can anyone help the OP by suggesting how he can "research" the founders of this new startup IB?

g-
gwkenny

 

[DominiConnor]

Good advice Gw. However, before you enter a room and criticize the advice of people inside I suggest you find out a little about their background first.

Indeed, I delude myself that I have some vague idea how this game works.
The question gave too little detail for anyone to give a strong opinion.

Lots of factors here, like your ability to recover if it goes tits up, your prospects where you are, what you will learn about the business in either role.
Also if you are thinking of leaving, you need to compare it with the opportunity set, not just your current job. Are you going up the food chain in the smaller outfit, do you get equity ?
Do you get real equity ? as an old git I will share with you that this is not an obvious and easy thing.

 

[gwkenny]

Indeed, I delude myself that I have some vague idea how this game works.

I wouldn't put yourself down that quick!

The question gave too little detail for anyone to give a strong opinion.

Please READ the OP's inquiry. He's looking for a SENSE of the pro's and con's. Not a strong opinion. I believe I have helped in this area, as well as some of the other posters.

I LOVE your following comment though:

Lots of factors here, like ... do you get equity ?
Do you get real equity ? as an old git I will share with you that this is not an obvious and easy thing.

MUAHAHAHAHAHAHAAAAAA. NOW THAT'S FUNNY!!!!!!!!

He DEFINITELY gave us enough information for me to give a STRONG answer regarding your question!!!

He's an ANALYST at an IB DEPARTMENT. DUDE an ANALYST!!!!!

Analyst isn't a career choice. You don't get vested at a BB.

If yer an old git with IB industry experience, then you know they kick you out after 2-years. It's the rare analyst that's kept and even rarer gets bumped to Associate.

Now HOW are they going to offer him real equity at a Startup??? Is he a rainmaker? A big swinging dick calling the cows home? Injecting capital? Uhhh, NO. In all probability he's got the terminology down and has a basic understanding of how the pieces in his industry move together. He's got relatively few connections and those connections he has are NOT the top guy at the Client.

Yeah there might be employee participation if he stays for 5 or 7 or whatever years they setup to get vested. But I truly doubt it's going to be anything glorious.

I can't help but wonder how you can ask that question? Is he going to get real equity?
______________________________________

As an aside, cause this really doesn't deal with the Quant community per se, but it's tangential...

If one is lucky enough to get into the relationship management side of IB (quant side or standard IB), then word choice is critical. Everyone is leveraged to their capacity. If you get in front of the client, you have a limited amount of time. The words you choose are extremely important and goes a long way in determining the type of relationship you'll have with your client. The same care that goes into the presentation hard copy should go into your presentation delivery. Once learned, this type of thinking becomes ingrained and you learn not to just listen as another speaks, but to breakdown what's being said and analyze it at the same time for inconsistencies.

In all probability, Domini thought about real equity as something to weigh when making the choice to jump to a startup but didn't think the thought through with regards to the applicability to the OP. If he did, he probably wouldn't have made the comment to begin with.

But this is the same type of crap that will lose you the client to another bank. It sounds smart but either is not relevant and/or the comment does not say anything substantive. Quant guys tend to be more back office, but the REAL good ones are trotted out to the client (or lead the team if it's a quant pitch) and can talk the talk as well as walk the walk. If anyone is aiming for a very successful career, to me that would be the epitome.

End of monologue
________________________________________

Domini:

If you are an "an old git" can you please answer the question I have been asking continually (which will help the OP): How can the OP "research" the founders of this new startup IB?

This will help forward the conversation.

g-
gwkenny

 

[Wallstyouth]

1) Make sure the firm is adequately capitalized. DO NOT BE AFRAID to ask tough questions. Where is the money coming from?

The firm is being backed by a few midsize hedge funds.

2) Does the contacts/work of the senior partners lend themselves to a small bank? Hedge funds are a bit easier if they already do this type of work. If they are starting a boutique IB in their specialty, it's a bit harder as being able to support issuance in the secondary market is very important and not having the ability/financing to do that will seriously inhibit their ability to get work. This has to be weighed against their reputation in the market. Some people are larger and life and Wall Street tends to collect more than it's fair share (as well as tons of assholes).

A few of the managing partners are from previous quant based hedge fund. This is not a boutique IB or M&A shop its a block options trading and options MM shop for hedge funds.

3) Ask who the Comptroller is and ensure that person is adequately qualified/experienced to handle all the crap that comes with compliance of a premier boutique firm (cause if this doesn't have that potential, then stick with the BB). This is very important. You want the seniors in the firm out getting business and if they don't have a competent comptroller they are going to get bogged down in crap. Even if they do have a competent controller, they will still spend a significant type with this stuff.

I had a discussion with key people already they have a few clients ready to go, the real hurdle is attracting enough liquidity to stay afloat long term.

4) Weigh it against your personal situation. I'm assuming you are a second year. How do you feel your chances are of being bumped up to Associate? Are you one of those rare few who can do it without graduate work? Remember, all your gaining by going to MBA is a common paper most others have as well, and more importantly, the contacts you will make at MBA school. Personally, if you believe you will make associate (and you will know it if you are) then I'd tend to stay at the IB unless the offer is to good to be true.

I'm more focused with the experience ill be able to gain working at a smaller firm where ill be able to get my hands in many different areas.

5) Ask for the business plan. There are a select few I'd trust without the business plan. Examine the timeline. Is it viable? Your in IB, look at the business plan with the training you have received (and hopefully you aren't one of the analysts who learns nothing and is just doing crap sdc/graph work), see where it would be especially in 1-year and 2-years.

I don’t know enough aspects of the core business to efficiently evaluate their long or short term goals in a realistic sense

You're still young. If you aren't going to make associate, and you're in your second year, then you have to weigh the pros and cons of putting off or not going to MBA versus the experience you'll gain. If you are first year, I'd say that you almost have to stay at the IB.

Humm....

6) Ask them about their staffing philosophy. What's their starting and ideal ratios of MD to Assoc. to Analyst.

Currently they have about ~3 very senior people with a very impressive track record. The firm itself has about 14 people on payroll.

 

[Andy Nguyen]

How can the OP "research" the founders of this new startup IB?

This is easier than previously possible with the invention of internet.
LinkedIn, Facebook, personal blogs, Google... the tools are there to find anything about anyone.
You can use LinkedIn to find out who are past and current colleagues of the founders/managers are, contact them, etc

I found the best to learn about a future boss is via headhunters. I met a few headhunters who if I tell them who I work for, can tell me everything I need to know e.g who where my boss has worked the last ten years, what success he had, who he worked with, what his personalities are like, why he left his previous jobs, where he lives, what he does for fun, etc...

Wall Street is a small place and people know people. Good headhunters know a lot of people really well so don't be afraid to ask.

Just a hint: those headhunters are members on Quantnet and post from time to time.

 

[gwkenny]

This is not a boutique IB or M&A shop its a block options trading and options MM shop for hedge funds...

The firm is being backed by a few midsize hedge funds....

I had a discussion with key people already they have a few clients ready to go, the real hurdle is attracting enough liquidity to stay afloat long term.

I don't understand, if it is being backed by a few midsize hedge funds, why is there a liquidity problem? Maybe our definition of "backed" is different. To me, "backed" means they put up money and not just promises of future business. Evaluate promises to a startup as having minimal value.

When you say MM shop for hedge funds.... Is this new shop an authentic MM? If so, is it associated with the main exchange of its market? If the Startup has concerns about short-term liquidity, I don't see how an exchange can make the shop a market maker, even if they do pay the fee. MM are supposed to provide liquidity. Or am I missing the definition of MM and it's not Market Maker?

I had a discussion with key people already they have a few clients ready to go, the real hurdle is attracting enough liquidity to stay afloat long term.

Who told you this? The Key people or the clients? If it's the Key people, does it make sense? Will these clients really place orders? Options are much more oriented towards best value rather than relationship. How is the Startup going to manage this? Is it the expertise of it's Key People? If so, do they have, or are they going to have, the same access to the Exchanges that they had previously so they will have the same information they had previously when creating their reputations.

Everything eventually has to be cleared through exchanges. There's little anonymity in block trading options (unlike equity) so why would they use the Startup instead of going through an existing Options company or the MM of the exchange?

This problem of enough liquidity to stay afloat long-term sounds like the Startup is not adequately capitalized. Is it going to take positions?

Currently they have about ~3 very senior people with a very impressive track record.

WHY is their track record very impressive? Is it because they had access to lots of resources (peon traders) so they could keep tabs on several parts of the market at once? Was it a trading tool that they themselves designed/developed to take advantage of market opportunities. Why is very key here.

I don't know enough aspects of the core business to efficiently evaluate their long or short term goals in a realistic.

With the business plan and your market knowledge (I'm assuming this is in the same market that you are in) you should be able to make some sort of guess!!! If not, then I would really recommend staying where you are and learning more!

But damn, if you can't make some sort of an assessment from the business plan, then joining that Company is a pure leap of faith. A business plan is suppose to SELL you on it's viability. If you can't understand it, how can you have faith in the folks who WROTE it?

Hell, it isn't even my business, and I can come up with same damn good questions that would help me evaluate their business plan. At the end of the day, the Startup has to bring some sort of value added to the customer. Just what is that value added and does it make sense? A lot of things you have said so far does not make sense.

On a side note, I thought you were a standard IB Analyst rather than one involved in trading. The people who I hang around and work on the floor (or with trading in general) tend to call themselves traders, while people in the relationship side call themselves IB. Some of the thoughts I mentioned regarding Analyst to Associate don't apply as much to Traders (if at all).

Andy:
In traditional IB good head hunters are few and far between in my opinion as everyone in the business is constantly networking with everyone else during business hours and everyone knows each other's business (nosy bastards!). I can see where headhunters would play a much more valuable role with quants and traders. Thanks for giving an answer forwarding discussion.

Reputation amongst peers is a very strong indication of character and ability. Question is how to go about and get that information. In traditional IB, there's a deal list which has the contact info the client, all the banks involved, lawyers, accountants etc... You can call those people (or have others call these people) and get info on folks (Ask a friend to call a previous client and ask if they would do business with so and so). After you've participated in a few deals, you'll develop your own contacts and you can use those to ask direct questions or have them ask direct questions for you.

Young traders that I know almost always go out after work (in NYC. Don't know about Chicago or anywhere else). This is where your networking skills come in, especially when you meet folks from other firms. I know the young folks are especially helpful of one another. If you went to a top school, your alumni's should be particularly helpful!

I've rambled enough and am probably signing off on this thread.

Good luck to you however you decide.

g-
gwkenny