How to Break into Investment Banking as a Former Entrepreneur
…but why would you ever want to go from running your own company to creating pitch books in a dungeon for 80 hours per week?
At first glance, it does seem implausible.
But I’ve seen a lot of questions about this transition in the past few years.
It might have something to do with the record number of idiots running around telling everyone to “be their own boss,” after which most people realize they do not want to be their own boss – but that’s just my cynical hunch.
As with any other transition into finance, your “story” is the most important part since you’ll use it when writing your resume, networking, and interviewing, so we’ll focus on that.
But before diving into the specifics, let’s go back to that original question: why would you want to make this move?
So Why Would You Ever Want to Do This, Again?
Because you started or co-founded a company and you realized it’s not for you.
You might have been lured by promises of how great it would be, or maybe you watched The Social Network or Silicon Valley one too many times and got sucked in by the fantasy without understanding the reality.
Or maybe you had a great idea and executed it well, but you couldn’t gain traction or turn it into a sustainable business.
Or maybe you did gain traction, but you didn’t like the culture of a startup or the money and skills you gained weren’t worth the time and effort you invested.
In any case, though, it’s unlikely that you did exceptionally well (read: earned $5-10 million or more) in your venture, and you now want to get into IB – with that amount of money you would have to be crazy even to think about it.
Bankers know this as well: they’ll assume that you either “failed” or did “OK but not that well” if you started your own business and now you want to move into finance.
What You Have Going for You: Is That Midnight Oil Burning Yet?
In general, banking and even buy-side finance roles have little in common with entrepreneurship because they require completely different mindsets.
So you’ll have to overcome quite a few obstacles to make this transition – but let’s start on a positive note and point out what works in your favor with entrepreneurial experience:
- No one will doubt your ability to work long hours since you are on call 24/7 and constantly work as a business owner.
- Your communication skills are presumably above average since you had to use them to secure funding, win customers, and recruit team members.
- You’ll stand out because few people recruiting for IB will have had your exact experience.
Your #1 Challenge: Proving You’re Not a Failure
On the other hand, you have at least one giant challenge to overcome: proving you’re not a failure.
Bankers often look at former entrepreneurs and assume that “they failed” and need to get traditional jobs – so they can save up money and eventually return to new ventures.
To overcome this objection, you need to make three points in your story:
- You started a company, but decided the work itself was not for you, and now you have moved on completely. The company did decently, and you left not because it “failed” but because of the work itself.
- While running this business, you were exposed to finance in some way (fundraising, budgeting, forecasting, etc.) and liked that aspect more than operations, marketing, or product development.
- And now you’ve demonstrated a clear commitment to get into the industry via off-cycle internships, pre-MBA opportunities, an MBA/MSF program, or some combination of those.
It is extremely difficult to make this transition without some additional experience or degree.
You might be able to pull it off if you had a corporate job for 1-2 years, started your own company, and then quit within 1-2 years, but I haven’t seen a firsthand example of someone doing that.
How to Spin Your Story Like a Pro
Normally you want to sound as accomplished as possible when telling your story, but it’s a bit different here: if you sound too successful, you’ll give the impression that you want to go back to a startup.
So you should focus on three points when you explain your transition:
- Point #1: Downplay Your Role and Contributions and Explain Why It Wasn’t for You
- Point #2: Use Your Startup Experience to Explain Your Shift into Finance
- Point #3: Explain Your Demonstrated Commitment to Finance
Point #1: Downplay Your Role and Contributions and Explain Why It Wasn’t for You
If you make it sound like you were part of a team, or at least that you were not the sole founder, your story will be more believable.
You’ll appear to have less of a “do or die” attitude toward entrepreneurship, meaning that you’re less likely to return to it in the future.
So it’s better to use language like “I had the opportunity to co-found a company with two classmates” or “I was part of the early team at Company X” rather than “I really wanted to start a company based on this idea I had…”
You could then say that you liked the company’s market and product and joined because of those reasons, but found that you weren’t a good fit because:
- It was difficult to gain specific skills because there was no structured learning environment – you had to do a lot of random things to find new customers and keep the business running.
- You had to cold call a ton of prospects to win sales – while you don’t mind some cold calling, you didn’t want to do it full-time.
- You didn’t have an edge because you weren’t a top engineer or highly connected investor/deal-maker, and startups heavily favor those types of people.
- You were not making an impact because the product was too early and you hadn’t found product-market fit yet; your skill set would have been more useful at a more mature firm.
You should pick points that are the opposite of what you get in banking.
For example, IB offers a highly structured learning environment and requires no cold calling from junior bankers (though you will have to do that in many entry-level PE ones).
Also, you don’t need an “edge” to succeed and make an impact as an analyst or associate – you just need drive, work ethic, and the ability to pick things up quickly. And you start seeing the results of your work within the first few months of the job (well, sometimes).
Point #2: Use Your Startup Experience to Explain Your Shift into Finance
Once you’ve explained why the startup world wasn’t for you, explain how the experience made you more interested in finance.
- You were involved in the fundraising process and liked pitching investors and answering their objections more than managing business operations.
- You were tasked with finance-related work, such as budgeting or creating forecasts, and found yourself more interested in that than in managing employees.
- You liked financial analysis, such as reviewing your company’s financials and making recommendations on future spending, more than interviewing users or researching new markets.
So you became interested in investment banking since it combines finance with the aspects you liked about the startup world, such as the fast pace, team environment, and client interactions.
Point #3: Explain Your Demonstrated Commitment to Finance
At this point, your story may sound logical but not credible: bankers will be skeptical of your intentions if you haven’t had relevant experience.
I have rarely seen someone make this transition without one or more of the following:
- A previous corporate job that was related to finance.
- An MBA or MSF degree.
- An internship, pre-MBA or otherwise, at a boutique bank or private equity firm.
You could point to self-study, but the examples above carry more weight because they require far more commitment from you.
The Result: Mark Zuckerberg Turned Gordon Gekko?
So if you put together all these pieces, you’ll end up with an outline like the following for your response to the “Walk me through your resume” question:
- The Beginning: Your undergraduate degree, what you did immediately after, and how you got involved with a startup.
- Finance “Spark”: While working on your startup, you realized it wasn’t quite for you because [Insert Reasons from Above] and that you were actually more interested in finance as you [Insert Reasons from Above].
- Growing Interest: So you became more interested in investment banking since you saw it as a way to combine finance with the skills you gained at the startup and in undergrad, and you completed an internship at [Finance Firm Name] to develop the required skills. You also decided to attend [MBA/MSF Program] based on feedback from recruiters and bankers that you would be seen as a “career changer” candidate.
- Your Future + Why You’re Here Today: So you’re here today because you want to make a long-term career in investment banking, and this firm is the best place to do that; you’re confident you can combine your background with the finance skills you’ve gained and advise companies in [Industry Name].
A good, executed example of this story might be:
- The Beginning: You’re originally from Chicago, but lived in Europe and the Middle East while growing up, and you attended high school in the UK and university in California at UC Berkeley. You were always interested in both finance and technology and took classes in both, and you had the opportunity to start an online marketing firm with two classmates after undergrad.
- Finance “Spark”: You were exposed to operations, management, and finance because you helped fundraise and create financial projections for the company, and you really enjoyed those tasks. While the startup was a great experience, you wanted more of a structured environment for learning the ropes, and you wanted to develop your financial skill set, so you decided to leave the company and pursue other opportunities.
- Growing Interest: You then interned at a local PE firm that was looking for people with experience in the online advertising industry; you liked working on deals, but you wanted to work on a greater variety of deals and advise companies’ management teams, which drew you to investment banking. You also decided to attend [Top MBA Program] to gain more of the skill set.
- Your Future + Why You’re Here Today: So you’re here today because you want to combine your startup, finance, and PE experience with the skills you gained at [MBA School Name] and work on more complex and varied transactions, ideally with Internet and technology companies.
Note the following points:
- He establishes his interest in finance early on so that his transition, later on, is not too much of a logical leap.
- He makes the process of starting a company seem like less of a 1-on-1 personal effort by saying “had the opportunity to” and pointing out the other two co-founders.
- He makes it clear that he left the company and is now pursuing only finance opportunities.
- The last part of the story references a specific industry, which is essential at the MBA level.
Networking: Dialing for Dollars Interviews
Once you have your pitch, you can start networking.
I don’t have much new to say, but a few additional points include:
- If your startup was venture-funded, go back to those VCs and get introductions to bankers from them. Even if your company failed or didn’t do so well, they should be willing to help as long as you had a decent relationship with them.
- Go back to candidates you recruited and even people you interviewed who might have connections to bankers, ask for referrals, and see what comes of it.
- Tap all your networks – undergrad, MSF, MBA, and anything else you have – and ask for referrals from professionals at the smaller firm(s) where you interned.
If you’re attending an MBA or MSF program, you need to start far in advance (~4-6 months) of the program’s start date to have a good shot at winning interviews via networking.
You obviously want to target smaller firms for your initial (pre-MBA) internship, but beyond that it makes sense to target firms only if you’re doing it based on industry focus (e.g., a biotech startup founder going to healthcare teams).
Your Resume / CV: Successful and Committed
Just like your pitch needs to show that you weren’t a “failure” and that you do have a demonstrated commitment to finance, your resume must do the same.
I recommend our MBA template because you’ll almost certainly need some additional degree to make this move.
Focus on anything finance-related from your startup experience, minimize the rest, and put an even greater emphasis on the internship(s) you completed afterward.
I see many bullets similar to the following on these resumes:
- Worked with team to conduct user surveys and determine most-requested features; prioritize implementation order and ensured timely completion
- Assisted CEO with fundraising deck and positioned company as leader in on-demand storage market for large enterprises
While these bullets aren’t terrible, the language sounds too product/marketing-focused and therefore less relevant to finance.
It’s better to emphasize the quantitative side and show how your work led to specific financial results:
- Projected costs and potential revenue from 5 most-requested features, and recommended one with potential one-year ROI of 2x and two-year ROI of 3x
- Researched top 10 venture capital funds and created customized fundraising presentations based on each fund’s portfolio companies and investment criteria; resulted in $2 million Series A round at $10 million valuation
Interviews: Objections, Please
As with all interviews, your success mostly comes down to your story.
But you can expect to be questioned on these additional points:
- How do we know you’re committed to banking for the long-term? Why not just start another company?
Answer: The fact that you’ve done it once makes you less likely to do it again because you know what it’s like and are 100% convinced it’s not for you. It would have been much easier to go back to another startup or take a normal job at a tech company; you’ve made a huge commitment by going down this path instead.
- So did your company fail? Why are you really here?
Answer: The company was not a blowout success, but it did decently, and it was still growing when you left. You left not because it failed or because you lost money, but because you realized the day-to-day work wasn’t for you and that finance was a better fit – for all the reasons you mentioned in your story.
- How do we know that you’re not still involved with your company on the side?
Answer: You’ve quit and no longer have any involvement. Plus, it would have been impossible for you to complete a finance internship and the MBA/MSF program and now recruit for banking if you were still spending time on it.
- Why didn’t you start out in investment banking if you’re so interested in it now?
Answer: You considered it, but you received advice that it would be better to start a company earlier rather than later, and at that point you were not 100% set on which path you would follow. The startup experience confirmed that banking would be a better fit for you, but you couldn’t assess that upfront without firsthand experience in the field.
You will get technical questions, and case studies and modeling tests are increasingly likely, especially at smaller firms.
Do These Strategies Work?
Yes – here are a few examples of anonymized, successful transitions from readers and coaching clients:
- Transition #1: He did a hardware-related startup right out of undergraduate with several friends, but realized it wasn’t for him within ~2 years, then won a part-time role at a boutique bank, and then won admission to a top MBA program and completed a pre-MBA internship at a PE firm before recruiting for and winning a banking role.
- Transition #2: She ran a real estate management company during university and for a few years after, but realized she wanted to apply those skills on a bigger scale and work on deals instead. So then she won a role as an investment analyst at a real estate development company and used that to recruit for and win a RE PE role.
- Transition #3: This person started out in product marketing and strategy consulting, left to acquire and turn around a failing business, and then won an operations/compliance role at a large bank. No, it’s not investment banking, but winning even a middle-office role without an MBA or other internship is impressive.
And Plan B Options…
So let’s say you go through all that effort but come up empty-handed because you couldn’t get the initial pre-MBA internship, you had bad luck, you didn’t have a good story, or you flubbed the technical questions.
Your top three options are probably:
- Venture Capital – Plenty of firms are looking for “Entrepreneurs in Residence,” and you might be able to leverage such a job to get into venture capital.
- Finance/Business Development at a Larger Company – With startup experience, you could target plenty of growth-stage firms that need expertise in these areas.
- M&A/Valuation at Big 4 or Independent Firms – These roles are often easier to get than traditional IB ones, and you can use them to move closer to your goal.
Are You a Failure?
If you’ve been able to start a business from scratch and make some amount of money with it, getting into investment banking should be easy, by comparison.
Most of it is about positioning yourself the right way, biting the bullet and completing another degree and gaining more work experience, and sheer persistence.
If you’re not willing to take those steps, then maybe it’s not for you.
But if you are, you can use the tips above to defy the odds and move from startup founder to financier.
For Further Reading
- No, You Can’t Have It All: Why Finance Does Not Guarantee You $10 Million and Your Own Beach in Thailand
- Should You Quit Recruiting or Working Full-Time and Start Your Own Company Instead?
- From $100K to $0 in 60 Seconds: How to Go from Investment Banking to Tech Startup
- Investment Banking to Sales at a Tech Start-Up: Do Deals and Make Bank Without Ever Staring at Excel Again?
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