by Brian DeChesare Comments (85)

Investment Banking: South Africa Edition

Investment Banking South AfricaWhile everyone knows about emerging markets like China, India, and the Middle East, there’s not as much awareness of South Africa.

But it would be a mistake to ignore it, because it’s an interesting market in its own right – and it’s quite a bit different from anywhere else in the world.

So let’s get started.

In The Beginning…

Q: Can you tell us about your background?

A: Sure. I owned a small engineering and IT business for a few years before making the move into finance. Back in undergraduate I had studied Computer Science and saw many of my classmates go into finance, but I was interested in starting my own business and did so with another student.

A few years into it, I got interested in equities trading but also realized that I would need an MBA to move into a new industry.

5 years after starting the business, I sold it and started my MBA program. I thought about going to a top 10 business school elsewhere in the world, but settled on something local instead.

I gave up some networking opportunities by doing that, but it didn’t matter much because plenty of banks came to recruit at our school – plus, my program was only 1 year so my opportunity cost was lower.

I interviewed around and won an offer at an investment bank that had recruited at our school.

Q: What’s the finance industry in South Africa like? How is it different from the US and Europe?

A: The main difference is the types of clients we work with:

  • They are generally below investment grade, though that’s not always true for multinationals and government-linked entities.
  • They’re almost always based in South Africa or on the African continent and have significant operations here.

Beyond that, the products are much simpler: convertibles were only introduced in 2007, and credit default swaps still do not exist.

We also have some unique products you won’t find anywhere else, such as those used to fund BEE (Black Economic Empowerment) deals.

Banks have flatter structures and there’s not much of a “ladder” – go-getters thrive and get deals, while those looking for a clear career path are often frustrated.

Even though I went for the MBA degree, it’s not too common among bankers here – most are either CAs (Chartered Accountants) or have a CFA combined with some type of mathematical degree.

And then a fair number of bankers don’t have finance degrees at all – they come from other industries and are simply good at making rain.

M&I Note: Once again, despite my bias against the CFA it may be more useful in emerging markets such as South Africa.

Recruiting

Q: What about the recruiting process?

Is it similar to the US with resume drops and then multiple rounds of interviews, or closer to Europe with assessment centers and in-person testing/presentations?

A: Overall it’s closer to the US – but interviews tend to be less formal and they’re more about fit rather than technical questions.

Interviewers emphasize your undergraduate major and experience, and there’s a heavy bias in favor of those with accounting backgrounds. They view Big 4 experience very favorably here.

Usually you go through 3 or 4 rounds of interviews over several weeks – many of my friends spent around 3 months interviewing before getting an offer, and it took me around 6 months.

Recruiting take longer not because interviews are more rigorous, but because of the pressure to hire employment equity candidates. Right now there aren’t even enough candidates to fill the required roles.

If you’ve performed well at a top university here you stand a good shot of landing an offer – but just like other markets, nothing is guaranteed.

Q: How do most people start working in finance in South Africa? Is it mostly locals or are they transferring in from elsewhere?

A: It’s mostly local South Africans who enter banking from university, usually studying commerce or a math-based field. Sometimes they also come in from accounting.

The employment and education demographics are heavily skewed toward those who benefited from Apartheid due to the country’s history – many others don’t have the required education.

We’re starting to get more people from other English-speaking countries such as the US, UK, and Australia, as well as South Africans returning home after working abroad.

Lately a lot of Africans from other countries like Nigeria, Ghana, and Zimbabwe have been coming here as well.

Wheeling & Dealing

Q: What types of deals are most common in South Africa?

A: The most common deals are working capital or property finance-related, with some advisory and corporate finance thrown in.

Depending on the market, there might also be leveraged finance or mezzanine finance deals – preferred stock issuances and BEE funding always slow down in recessions, as does anything private equity-related.

The industries themselves are diversified – parastatals, retailers, manufacturers, automotive, mining, telecoms, financial services, and so on. Technology is the only industry here with very little lending or deal activity, because the risk-return is poor.

Q: Can you describe the culture, pay, and lifestyle? Is it more like the US with extremely long hours but higher pay, or more like other regions such as Australia with better hours but also lower pay?

A: The hours are probably closer to what you would find in Australia, although a lot of that is determined by your group. If you’re working market hours – like a trader – then you’re there from 7 AM to 5 PM with no weekends.

Investment bankers work weekends and leave the office around 10 PM quite often, but all-nighters and working to the point of exhaustion are not as common as they are in the US.

It’s still banking, so anyone in corporate finance / M&A is told not to plan anything in advance, and 16-18 hour days are to be expected.

Q: And what about the pay?

A: Similar to other emerging markets, it’s lower than the US in absolute dollar terms but it’s higher relative to the cost of living.

You can live a very good life in South Africa on what you make in finance – though you will encounter the same issues as in other developing countries (e.g. there is high income disparity, radically different classes, and so on).

Q: Do you hang out with your co-workers? Or does everyone do their own thing?

A: Co-workers are sociable and people hang out together quite a lot. My bank also puts on a lot of company-sponsored events and sports, and we even have a sponsored bar.

There’s some rivalry between banks here, but usually people from different banks hang out together at the same places.

Q: What about exit opportunities? Do people stay in South Africa or move elsewhere?

A: Many bankers move on to executive finance roles in industry, sometimes leaving the country and going to the UK, Europe, or Australia.

Since there are so few qualified individuals here, there’s a lot of inter-bank hopping – similar to other emerging markets, there are fewer buy-side firms, so the mythical exit opportunity doesn’t get as much hype here.

The one exception is the hedge fund / prop trading industry, which tends to attract a lot of ex-traders coming from banks.

Similar to the US, it’s tough to move directly from IT into investment banking or other front-office roles and hardly anyone in those roles moves up – though there are exceptions if you play your cards right.

If you’re already in a front-office role, moving up is a different story – it can be easier than in developed markets, but as I mentioned before there’s also less of a “path” and it’s heavily dependent on your results.

Q: Great, thanks for your time.

A: No problem.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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by Brian DeChesare Comments (93)

What Do You Do as a Venture Capitalist?

What Do You Do as a Venture Capitalist?
Business man calling by cell phone and working on computer at the beach

Last time around we talked at length about how you break into venture capital, what VCs and headhunters look for, and how resumes, networking, and interviews differ when you apply to VC jobs.

Now we’re going to jump into all the questions you’re really curious about:

  • What you actually do each day as a venture capitalist
  • How you advance to the Partner-level
  • How much you work and how much you get paid
  • The economics of VC firms and why your pay is so dependent on the firm’s size
  • Trade-offs of venture capital vs. investment banking, private equity, and entrepreneurship

So let’s dive right in.

A Day in the Life

Q: So what’s an average day in the life of a VC like? I’m assuming that you don’t have to fix printers or run to Starbucks quite as much.

A: A lot of meetings. Most days are dominated by meetings with entrepreneurs and portfolio companies and networking at conferences and other events.

You do spend some time on research and due diligence for active deals, but most of my days were spent meeting people and networking.

After the close of business each day, you might go home “early” or you might stay late depending on what’s going on – just like investment banking, you’re busiest when you’re working on a deal and it’s close to the finish line.

Q: When you say “meeting people,” are you talking about tagging along with Partners, or going out and setting up meetings yourself? How much independence do you have?

A: At my old firm, the pre-MBA Associates contacted companies and set up everything by themselves. Sometimes Partners and Associates would go to the same meeting, but more often than not I did everything by myself.

Associates are the “front-line filter” – they meet with companies initially and figure out which ones are interesting, which ones might be good investments, and so on.

Once I pre-qualified the company, I would bring it to the Partners and say, “This company might be interesting – we should take a closer look at them” and then the Partners would become more involved and start meeting with them as well.

Q: So it sounds like your firm was very sourcing-heavy. How much of your time was spent on sourcing vs. deal execution?

A: I don’t have an exact split for you, but early-stage firms tend to do more sourcing and late-stage firms do more due diligence, modeling, and deal execution work.

Although my firm was late-stage, they still focused on sourcing and the majority of my time was spent meeting with companies we might invest in.

Even when deals came along, 99% of them would never go anywhere – we might start doing due diligence, find something we didn’t like, and cut off the investment process right there.

This is very similar to PE firms, where you might look at hundreds of companies each year but only make 1 or 2 investments.

On the buy-side you spend a lot of time saying “no” to people.

Q: On a similar note, I’m assuming that you didn’t do much modeling?

A: For truly early-stage companies – pre-revenue – we didn’t do much modeling.

For later-stage companies with revenue and profit, we did the usual modeling and valuation exercises.

It’s not as “intense” as what you see in investment banking because we don’t spend time trying to make everything perfect and adjust for every last non-recurring charge.

All About Advancement

Q: So that’s what you do as a junior VC: find interesting companies, filter the best ones, and bring them to the Partners who make the actual investment decisions.

How do you advance to the Partner-level? Is it just a matter of finding the next YouTube, getting a 41x return on investment in a year, and then moving to the Bahamas?

A: It depends on the firm you’re at and how their partnership works, but you need to find good investments and generate solid returns for the firm in order to advance.

You don’t need to find the next YouTube to advance to the Partner-level – that only happens once a decade. It’s more about getting consistent base hits rather than the elusive grand slam.

You need to build a track record over time and become genuinely involved with your portfolio companies – source the deal, sit on the Board, advise the company and help with strategic issues, and then achieve a solid exit.

You don’t need to wait for the actual distribution of proceeds from your exited investment to advance – an acquisition, IPO, or even a situation like Facebook where they’ve grown an incredible amount and are clearly going to have a huge exit – are good enough to “prove” yourself.

Q: Right. But what about making the move from junior Associate to more senior levels at a VC firm? How does that happen?

A: First off, 90% of the time if you come in as a pre-MBA Associate you won’t be able to advance to the Partner-level at all.

You’re not on “Partner-track” and no matter what companies you find, you’ll be expected to stick around for a few years and then go to business school or do something else.

Most of the time you need to come in at the post-MBA level to have a chance at advancing to Partner.

The exact process is tricky to describe, but the more interesting companies you source and the more work you do, the more the VC firm will trust you to start making decisions on your own.

Until you’re an official Partner, you can’t make investment decisions but you can present your case to the Partners, argue for investment, and become actively involved with the company itself.

So as you start finding better investments, the Partners will give you more responsibility, then you can use that added responsibility to find even better companies, and that process repeats until you reach the top.

Q: Ok. Now let’s play devil’s advocate and assume that you’re just not a good investor no matter how long you’ve been in the game, and that you can’t find any quality companies.

What happens if you can’t make the investments you need to reach the Partner-level?

A: Unlike investment banks, VC firms will rarely make a show of firing people just to say they fired people.

Instead, they might just pull you aside and say, “You’ve been here 5 years but haven’t built up much of a track record and we’re not sure you can get to the Partner-level. We can keep you on awhile longer, but you need to get some good results soon.”

Other times, they might just reduce the economics for you and pay you less if you’re at the Principal-level (just before reaching Partner) and use that as a signal for you to leave.

There’s no formal layoff process – VCs are far more subtle about hiring and firing than bankers.

Q: So let’s say you’ve been working in VC for a few years but can’t advance, so you get asked to leave. What’s your next move?

A: Common paths are to join a portfolio company, start your own firm, or go into business development.

As you move up in venture capital, you focus 100% on developing your network, making lots of contacts, and getting to know your industry well – all of which are useful for business development or working at a portfolio company.

Starting your own VC firm is tougher to pull off and you need more of a track record to do that – if you’re a junior Associate with no investments behind you, you won’t be able to raise capital at all.

Experienced investors can struggle to raise even “small” amounts of capital, so starting your own investment firm is the most difficult of these options.

Pay, Hours & Likes and Dislikes

Q: Let’s talk about money – specifically, how much money did you make?

A: Do I need to give you an exact number?

Q: I like numbers. But estimates are fine if you don’t feel comfortable with that.

A: Your base salary in VC will be higher than what you earn as an investment banking analyst – similar to how your base salary generally increases when you move into private equity.

Bonuses are lower at early-stage firms because there’s not as much money to go around and the fees are not high enough to pay everyone millions of dollars.

At late-stage VCs and more PE-like firms, bonuses are higher and are closer to what you’d make in banking or traditional PE.

Pre-MBA Associates usually won’t get carry, whereas post-MBA Associates may or may not depending on the firm.

Q: Let me stop you right there because some readers may not be familiar with “carry.” Can you explain what it is and how you get paid in VC?

A: Sure. There are 3 ways you make money as a venture capitalist:

  1. Base Salary
  2. Year-End Bonus
  3. Carry

“Carry” refers to money you invest alongside the firm when they invest in a company.

Let’s say that your firm is making a $5 million investment in an early-stage company – if you have carry, you might be allowed to invest $50,000 of your own money along with the firm.

Then when they exit, you’d also reap the profits – or losses – on your investment.

Carry is seen as a big perk because of the potential to make a lot of money, but it’s quite rare to find the next YouTube that gets you a 41x return on investment.

More often than not you’ll get a small bonus but you won’t become a billionaire with these investments – to benefit from carry, you need to be at the firm a long time and invest in dozens of companies.

Q: You mentioned how bonuses are lower at early-stage firms because there’s not as much money to go around – can you explain the economics of VC firms?

A: Sure. Let’s say the firm has $100 million under management – they might charge investors a 2% management fee each year and 20% of their return on investment (the carry).

That 2% management fee – $2 million each year – is used to pay base salaries and bonuses.

So a fund like this with $100 million under management would not be able to hire that many people – maybe 1-2 Partners and a few Associates.

Everyone wants to make millions, but if you have less than $2 million to go around that’s not possible unless you consistently find winning investments.

That’s why larger firms pay bigger bonuses: if you have $1 billion under management rather than $100 million, 2% now represents $20 million each year.

And just because they have 10x as much capital doesn’t mean they’ll hire 10x the number of people – so there’s more bonus money to go around.

Smaller firms don’t want people who are in it only for the money.

It’s not “Work 100 hours a week for me right now and you’ll be rich at the end of the year” – it’s more about long-term incentives and being genuinely excited about what you do.

Q: Speaking of hours, how much did you work as a junior VC?

A: Less than in banking. Weekends were free most of the time, but sometimes I stayed late at work if we were busy with deals.

On average I put in 60-hour weeks, though that dropped when we were in “sourcing” mode and rose when we were in “deal execution” mode.

Off the Record

Q: A lot of people hype up exit opportunities because they view the end game as superior to banking itself.

Having worked in investment banking, then at a late-stage VC firm, and now at an early-stage firm, what did you honestly like and dislike about the industry?

A: One of the hardest points to assess when you’re recruiting is cultural fit – you can chat with Partners all day long, but it’s hard to say how well you’ll fit until you actually work there.

VC firms are more like family businesses than rigid conglomerates – sometimes they treat you like a temp, and other times they treat you as a peer.

But it’s difficult to ask them about this directly and get good answers – so joining any VC firm is riskier than moving to a bank, where there are lots of people and many sources of information.

If you compare venture capital to investment banking, obviously the work/life balance is much better – but on the flip-side, you also lose a lot of the camaraderie you find in banking.

You work alone 90% of the time, and you’re going out there and making things happen on your own.

That gives you a sense of empowerment, but it’s also lonelier than banking because you’re always meeting new people but rarely getting to know anyone well – and you don’t hang out with your co-workers.

It’s like how you pointed out before that the buy-side and entrepreneurship are both lonelier than working on the sell-side.

VC is similar to being a “mini-entrepreneur” because you have to make decisions without following specific orders – completely the opposite of banking.

Q: Right. When I explain to people “what I do” I give the same type of summary and they look at me like I’m crazy because they don’t understand how there are downsides to everything.

What are your future plans now that you’ve done banking, VC, and returned to VC?

A: Once you work in venture capital, it gets more difficult to become an entrepreneur – you can’t beat the lifestyle, and you can bet on companies without taking nearly as much risk as the founders themselves.

I was thinking of going the startup route, but I decided to go back to VC and work at an early-stage firm after I graduated from business school.

I had planned to pursue startups while at b-school, but it was impossible to fit in – you have a lot of work, and unless you’re also networking constantly it’s a waste of time and money.

So I’m planning to stay at my current firm for the near future, and then pursue my own projects on the side in my free time.

Everyone interested in venture capital wrestles with the investor vs. startup founder choice, and that’s what I’m debating right now.

Q: Yup, I know how that goes. Thanks for your time – that was a great interview and I learned a ton about venture capital.

A: No problem. Let me know if your company is looking for investors!

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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by Brian DeChesare Comments (68)

Investment Banking in Saudi Arabia: The Hottest and Most Overlooked Emerging Market in the World?

Investment Banking Saudi ArabiaWhat do you think of when you hear “emerging market”?

ChinaIndia… Russia… Brazil…

And then maybe Dubai, Eastern Europe, Southeast Asia, and a couple others.

But Saudi Arabia is probably not at the top of your list.

That could be a big mistake, as we’ll find out in this wide-ranging interview with a reader who works in investment banking in Riyadh.

We’ll cover why it’s a great place to be right now, how the finance industry there works, how a social scene without models and bottles works, and whether you should head over there.

How It All Started

Q: Most people don’t start out planning to work in the finance industry in Saudi Arabia. Were you from the Middle East? How did all of this start?

A: I was born and raised in the UK, and went to university there. I did an internship in equity sales before moving into investment banking.

At the time, the market was good so it wasn’t quite as difficult to land investment banking offers – I went to a large bank and planned to work in London for 2 years, and then spend my 3rd year abroad as part of the graduate program.

Q: So were you thinking of moving to Riyadh even back then? Where were you planning to go?

A: At first I was thinking about New York, Hong Kong, or Singapore – this was back at the peak of the bull market, and all of those seemed like good options.

Two years later, the sky had fallen and finance was completely different – and it seemed like those markets were now the worst ones to go into.

Around that time, my boss approached me to join his new team in Saudi Arabia – my bank wanted to focus on expansion into emerging markets, and they had asked my boss to lead our efforts there.

I didn’t know much about it at the time, but it seemed more promising than my other options, so I jumped on the opportunity.

Q: Ok, but wait a second here: you weren’t from the Middle East and I’m assuming you didn’t know Arabic. Was any of that a problem?

A: There were no language requirements – most business is conducted in English. Knowledge of Arabic helps, but it’s not required.

Since it’s an emerging market, they value people with strong technical skills from London and other finance hubs – they’d rather have someone from the West who had a strong grounding in finance vs. a local native speaker who didn’t know as much.

Moving to Saudi Arabia

Q: Interesting. So what’s the finance industry like in Saudi Arabia? I know nothing about it.

A: It’s very, very underdeveloped – which means that the growth potential is huge. Even though there’s a high per-capita income, there hasn’t been much of a finance market until recently.

Most deals are IPOs and M&A is still underdeveloped, though that’s starting to change.

Any banker coming from the US or Europe can quickly make a name for himself in this market, because it’s the equivalent of the Wild West right now.

Over the next few years there will be a surge in M&A activity as recently listed companies begin to consolidate, and ECM activity will continue to be strong.

Government intervention also helps – for example, there was a royal decree awhile back that ordered certain cement manufacturers and insurers to list over the next 2 years.

Q: Sounds like a good place to be. What about your clients – I’m guessing they’re mostly oil companies?

A: It’s certainly the biggest industry here – but there have been a lot of IPOs in the $100 million to $700 million range in recent years across many industries, including retail and transportation.

Beyond the oil companies, we also do a lot of work with local families.

In Saudi Arabia, around 20 families control the majority of major corporations and decide which companies to acquire and where to invest their assets.

Even though Dubai is close-by, they’d rather use advisors on the ground in Saudi Arabia so they can get day-to-day attention and build close relationships.

More so than other regions, all business in this country is relationship-based: once you get close to a certain family and build a relationship with them, it’s almost impossible for other banks to come in and steal their business away.

Once we start working with them, we advise on everything from acquisitions to IPOs to asset disposals – I even got to work on a Restructuring deal awhile back and worked directly with CEOs and other senior executives.

Q: Wow, so you’re getting a lot more responsibility than in London?

A: Exactly. Clients love the fact that I’m UK-educated and then worked in finance in London for a few years to learn the fundamentals really well.

A lot of times senior bankers and clients just let me run with ideas and don’t give me much guidance on what they want to see – it’s a huge change from other regions, where everything is micro-managed.

Much of what we do here is more “conceptual” than what you see in London or New York – since the industry is immature and since most businessmen speak English as a second language, they want simple explanations.

Just as one example, we don’t spend time scouring for dozens of non-recurring charges, adjusting Enterprise Value for capitalized leases and pensions, and being 100% scientific about everything because no one cares.

Q: This sounds much better than standard investment banking already. Since you get more senior exposure, can you move up quickly there?

A: Absolutely. Some of my friends have started as Associates and then moved up to the Director-level in only a few years – that would be impossible anywhere else, even in a frothy market.

The capital markets are growing faster than the domestic Saudi labor supply can support, and talent is scarce.

If you’re a Western-educated, Arabic-speaking investment banker there’s no better place to be.

Saudi Arabia vs. Dubai

Q: Let me stop you right there. You said “there’s no better place to be,” but what about Dubai? That’s more visible on most peoples’ radar vs. Saudi Arabia.

A: This is all my opinion, but Dubai would have been more promising back before they experienced massive growth (and then massive problems, and so on).

Most bankers in Dubai actually want to be involved with Saudi Arabian deals, but it’s a thorny political issue and Saudi companies prefer advisers in their own country.

The other issue is the cost of living – in Dubai it’s not much different from developed countries because of all the expats, but in Riyadh it’s incredibly cheap. I save over 70% of my pay even after accommodation and travel.

Q: Wow, you’ll have to tell me your secrets on how you pulled that one off. Even if you view Saudi Arabia as superior to Dubai, what about other regions in the Middle East? Is anything else “hot”?

A: There are a couple other promising places here – Bahrain, a tiny island country off our coast, has always been a hub for ex-pats and could also be good. Qatar is also promising, but it’s much smaller.

But these days most multi-national firms are choosing to go outside Dubai to establish a presence in the Middle East – for example, McKinsey is now setting up an office in Riyadh and they’re recruiting a lot of Saudi nationals rather than exclusively foreigners.

Life Without Models and Bottles

Q: Everything seems rosy so far. But let’s talk about the downsides of living in Saudi Arabia. You haven’t mentioned models and bottles yet – are there any?

A: No. Do not come here if you like going out, clubbing, and drinking.

Living in Riyadh only appeals to a certain type of banker – you have to like activities other than partying or you’ll have a miserable time here.

The social scene here is centered on “compounds” – residences for Westerners living in the country. Women can wear normal clothes there, there are no Saudi nationals, and you can drink alcohol.

Q: Wow. So what exactly do you do for fun in Saudi Arabia if drinking and clubbing are not options?

A: Mostly sports and outdoor activities – I play rugby, golf, and I’ve gone scuba diving here a lot as well. I’ve also traveled all around the Middle East, which is convenient because plane tickets to other countries are quite cheap.

Q: The social life sounds pretty surreal. What advice do you have for someone looking to work there?

A: Don’t even attempt to come here alone and figure things out – you can’t even get a tourist visa unless it’s during the pilgrimage or you’re on certain guided tours.

Everything needs to be done through your bank’s HR department – just make sure all your forms are in place and that your housing accommodations are set up before you get here, because it’s very, very tough to find housing by yourself.

The visa situation is also complicated because you need to get an exit visa to leave the country even if you have a work visa – and to make things even more fun, all the dates are according to the lunar calendar so you could easily end up with an expired visa.

As far as actually living here, I recommend starting out in a compound and building your social circle there before you move off to live in an apartment.

Q: What about family visits? Can relatives visit you at all?

A: Usually family trips are part of your contract – that’s standard in the region. Just make sure it’s spelled out explicitly.

Culture, Hours & Pay

Q: It sounds like the social experience is quite a bit different, to say the least, in Riyadh – but it also sounds like you’ve had free time for other activities. What are the hours like?

A: To start with, we have a standard holiday of 42 days per year along with 10 national days – so effectively we get 52 vacation days total each year.

That means I get to go back and visit friends and family every 2 months, which is a huge improvement over standard investment banking.

On average, I work around 50-60 hours per week. It is very, very rare to work more than 90 hours and I haven’t pulled any all-nighters in the 2 years I’ve been here so far.

During Ramadan, the hours are 10 AM to 3 PM for an entire month – and the senior bankers can’t even make you work more than that, because clients are just not there.

Q: Ok, I like the hours. Are they shorter because you don’t do as much busywork?

A: That’s definitely one reason. As I mentioned before, we don’t spend time scientifically adjusting comps for capitalized leases, pensions, off-balance sheet items, and so on – clients are just not sophisticated enough to notice or care.

Presentations are rarely more than 20 pages – English is a 2nd language for 90% of our clients, so they want very simple explanations. Pitching presentations are occasionally longer but 75% of the materials are standing/generic and require little to no updating.

M&I Note: To give you an idea of what 20 pages means, it’s rare to have a presentation less than 20 pages in the US – and pitch books can sometimes go on for 100+ pages.

Q: So what’s your average day like? Is there much downtime?

A: I’m usually pretty busy throughout the day – there’s not as much downtime as in other regions. I finish most of my work around 6 PM, but I might stay in the office for a few more hours depending on what’s going on at the time.

Q: What about the pay? Is it the same as London, minus the taxes?

A: It’s even better than that – in Saudi Arabia there are absolutely no taxes on anything. No income tax, no sales tax, and no VAT.

Salaries and bonuses are similar to what you would get in London at the junior level, but it’s all paid out in the local currency and we pay no taxes.

The currency is pegged to the US dollar, so there’s not too much FX risk if you’re a US citizen.

As far as bonuses, in peak years junior bankers could get around double their base salaries – but in bad years bonuses could drop to nothing or almost nothing.

When you get to the mid-level and up, a top Associate or VP in London will definitely make more than someone in Riyadh – but you might be working twice as much and you’ll lose a lot to taxes.

Q: Aha, so that’s how you save over 70% of your income. No taxes, no going out, and solid bonuses – what’s the cost of living like in Riyadh?

A: Very low. I spend about $5-$10 per day on food and non-rent expenses. Saudi Arabia is one of the few places that allows you to work 50% less and save 50-100% more than you would in New York or London.

Exit Opportunities: Working for “The Family”

Q: If you can get past the social scene, Saudi Arabia sounds like a pretty interesting place. Do you think you’ll be going back to London anytime soon?

A: Originally I was just planning to stay for a year, but I decided to extend my contract.

If you want to be an MD in London one day, coming here for 1 year to get the experience is a great idea – but if you stay longer than that, you’ll get used to 50-60 hour weeks and you’ll lose the cutthroat drive you need to make it to the top.

I may move back to London in the future, but it might be in a more specialized role (e.g. cross-border M&A) if I continue within investment banking.

Q: So it sounds like you move back to Europe quickly or you stay in the region long-term. What are the exit opportunities like after doing investment banking in Riyadh?

A: Similar to Europe, other parts of the Middle East, and everywhere outside the US, there is not as much of an obsession with exit opportunities here. Since the hours are good and the pay isn’t much different from London, many people don’t see the point in moving elsewhere.

If you do want to exit, private equity is a common route – it can sometimes be easier getting into top-tier funds here because many of them are relatively new to the scene and are looking for talent.

Q: What about sovereign wealth funds? I hear they’re kind of a big deal in Dubai.

A: Not so much in Saudi Arabia. The only “sovereign wealth fund” is the government itself, which has 2 organizations that use pension and state money to make investments. They don’t really use Westerners for any of these investments, and they’re focused on domestic infrastructure.

The #1 exit option is going to work for a “family” that controls major corporations here. They have between $200 and $300 million under management and would tell you, “Go invest our capital.”

You need to get approval before doing anything major, but they give you far more free reign with their capital than you’d ever get at a traditional PE firm or hedge fund.

It’s a nice arrangement and the only drawback, once again, is the odd social experience living in Saudi Arabia – you have to be open to it, or you’ll be miserable the whole time.

Q: So what’s your plan? Are you going to do banking and then work for one of these families? Or do you want to go back to the UK eventually?

A: I do want to return home eventually since I have friends and family back in the UK.

I’m interested in starting my own business one day, but at this point I’ll be staying in Saudi Arabia longer than I originally planned – lots of firms are coming into the region and setting up shop here, which creates some good opportunities if you’ve already made a name for yourself.

Q: Awesome, thanks for sharing your story. I think I learned more about Saudi Arabia in 1 hour than I have in the past 20 years combined!

A: No problem.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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