Online Entrepreneurs the New Investment Banking

The Dilemma

Last week a talented 22-year old finance/law student I mentor recently faced a dilemma between joining a “bulge-bracket” Investment Bank and following his online dreams.  Several of his University colleagues and recruitment specialists I subsequently spoke with confirmed that this daunting career cross-road had quietly become commonplace.  Is it possible that the best and brightest finance graduates are viewing an “apprenticeship” within investment banks, management consultancies, private equity and hedge funds as a sub-optimal career path?  My mentee shared some insights around the growing number of global finance graduates opting for a new career alternative – the online world – and it seems there is no turning back.

War for Talent

Many exceptional qualities which have come to define candidates in the highly-competitive Investment Banking graduate marketplace – confidence, self-starting, open-mindedness, discipline, creativity, determination, people-skills, strong-work ethic and passion - are near identical to those qualities sought by Venture Capitalists when critiquing successful online entrepreneurial founders.  The online world could be seen as a natural conduit for becoming what Seth Godin calls an “indispensible” leader of the future - remarkable, non-linear, game-changing and artistic.  The war for talent between Investment Banking and Online has many familiar hallmarks of Clayton Christenson’s discourse on disruptive innovation theory.

Training and Experience

Even if large Investment Banks succeed in winning the short-term war for talent, it appears many finance graduates may enter the profession with a Pareto strategic mindset (to quote my mentee “to learn as much as I can, as fast I can and hopefully not look to old”).  Finance graduates still seem to recognise the tremendous benefits of even a few years’ of Investment Banking experience – such as capital raisings, deal structuring, listing companies, financial modeling, pitching, deal negotiating, process understanding and portfolio analytics - skill sets which easily translate into the start-up and venture capital industry.  Although nothing can ever quite simulate the experience, pressure and learnings of a real-life Investment Banking environment – a growing list of quality learning alternatives in accounting (e.g. CA, CPA), finance (e.g. CFA Institute, Masters Finance) and e-learning (e.g. WallStreetPrep) are increasingly viewed as quasi-substitutes to gaining requisite technical and commercial industry know-how.

Changing Incentives

Walking, working and succeeding in the salubrious high-rise offices of major cities has lured many high-achieving finance graduates across the world to Investment Banks.  For some, the prospect of being 28 years old earning US$350,000+ a year working 80+ hours as a week will always be alluring.  However, the emerging breed of Generation Y/Z finance graduates appear to want to re-cut their Faustian bargain.  They demand improved lifestyle, learning, egalitarianism and flexibility. They’re interested in working smarter, not harder.  They want to working alongside colleagues and clients who are amenable and helpful.  They want time to nurture their genuine relationships (which you can’t service working 80+ hours per week).  They seek quality mentors to help them channel their resources towards building and growing a successful online business.  Finance graduates seeking to entre the entrepreneurial online world are supported by more start-up incubators and deeper pools of investment capital exist than ever before.  Many are choosing to live at home longer. Many are underwritten by the “bank of mum and dad” and three F’s (friends, families and fools). They are seeking incentives structured around their appetite to calculated risk, which encourage the challenging of established technologies and industry practices.

Conclusion

Global finance graduates appear to be increasingly using their time at University to learn and explore how the potential of the online world can help them take control of their own careers, lifestyle and long-term earnings potential.  Learning to incentivise and manage talent has always been a great challenge for the Investment Banking industry.  Maybe it is new industries and opportunities, rather than traditional competitors, that present the greatest threat to the status quo?