Technology Investment Banking: Career, Firms, League Tables

By Mike Hinckley

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Tech businesses have dominated the U.S. and international stock markets for the past several years.

The sector has been among the most rewarding for investors and investment banks. Meta (Facebook), Apple, Google, Microsoft, and Amazon are among the most important companies in the world.

All this is why technology investment banking – the group within investment banks that provides advice and financial services to tech companies – has taken on new prominence.

In this article, we’ll discuss everything you need to know about technology investment banking – what it is, how it differs in different regions, how it compares to other investment banking groups, and sub-sectors within the group.

What Is Technology Investment Banking?

Technology investment banking refers to a sector team that provides investment banking services to corporate clients within the technology sector.

Like all investment banking groups, the technology investment banking group offers advice on capital raising through private placements, debt and equity issuances, mergers and acquisitions (M&A), and restructuring.

However, this group specializes in clients within the technology industry. The software, internet, hardware, semiconductor, and I.T. services markets are its primary areas of interest.

While some investment banks have separate technology departments, others include them in the broader Technology, Media & Telecom (TMT) group.

Technology investment banking by region

The concentration of large tech businesses in North America, notably the U.S., makes this region the most prominent for technology investment banking.

Enormous technology companies have emerged in Asia like Samsung, L.G., TSMC, Alibaba, and Tencent, making it also a fertile area to provide technology investment banking services.

The tech scene in Europe has traditionally been less robust than North America and Asia, but there are still iconic and profitable technology companies there who need investment banking services.

What differentiates Technology investment banking from Technology, Media, and Telecom (TMT)?

TMT investment banking goes beyond simply Technology to cover the media and telecommunications sectors.

This subgroup exists because these three are interconnected: media businesses create the material, telecom companies distribute it, and tech companies supply the tools—hardware, software, and other resources—needed for content consumption.

Companies in this sector have been increasingly convergent in recent years. Disney and Netflix are the most notable.

Initially, a digital firm that distributed other people’s material to the public, Netflix has since transitioned to producing its own. Disney also began by creating cartoons, but it is now a major player in television programming, content creation, streaming, and other parts of the value chain.

Why technology investment banking

There are many great reasons to consider joining technology investment banking groups, if you’re just starting your career or if you’re considering a change.

This also happens to be a very popular interview question, as well.

Luckily, there are many themes to draw upon to make a compelling case about why technology investment banking might be the right fit for you:

Passion for technology – If you’re a computer or software engineering major, you’ve been a hobbyist through the years, or you just follow the industry – it could be a great fit for you.
It’s growing – With the growing influence of technology and software, the field of technology investment banking has been growing rapidly as new waves of technology companies come of age and require large-scale investment banking services
Great exit opportunities – If you aren’t sure about staying in investment banking long-term, this could be a great group to join. The reason why is there tends to be really great (and diverse) exit opportunities. I discuss this in more detail below. However, NOTE: you should NOT include this as part of your answer to the interview question, because talking about exit opportunities is definitely frowned upon.
Diversity of deals – Within technology, there are so many different sub-industries and business models that you can encounter. Also, given the diversity of companies there are many different types of deals in this space (e.g. LBO’s to M&A to early stage financings)

Sub-Sectors within Technology Investment Banking

Defining the “technology” sector is increasingly challenging, as tech has grown and its influence has pervaded nearly every industry.

The growing size of the technology industry has therefore required that investment banks split up the technology investment banking group into different “sub-sectors” or “sub-groups”.

Every bank will organize this differently, but typical “sub-sectors” include:

Software – covers software-as-a-service (SaaS) companies. Examples: Salesforce, Twilio
Media & Telecom – covers companies that produce or distribute content and communications. Examples: New York Times, Verizon
Internet – covers companies whose business model is newly enabled by the internet. Examples: Uber, Airbnb
Hardware – covers companies who build or maintain the equipment that powers technology products or companies. Example: Cisco, Dell
Semiconductor – covers companies who build specialty chip or semiconductor hardware. Examples: Intel, Qualcomm
IT & other – covers all other companies within the technology that are not covered above. There are typically a range of IT service providers. Example: ADP, Infosys
Regional (e.g. West Coast) – Given the cross-cutting nature of technology industries, some banks (e.g. Goldman Sachs) have developed more “regional” coverage model, where certain teams will cover all technology clients based in their geographical area

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Software Investment Banking

As discussed above, software is typically a sub-sector within broader technology investment banking groups. These sub-groups focus on companies whose main business model is SaaS.

The reason some firms brand themselves as software investment banking groups (rather than technology investment banks) is that they focus only on software companies due to the attractive business model and high growth that software companies have seen over the past several decades.

Industry trends that drive Technology Investment Banking

The following are a few major forces that affect all technical verticals:

Politics and “National Security”: Technology has not historically been a tightly regulated industry, but this is beginning to change as nations recognize its importance to national security. All internet companies have been significantly impacted by friction between the U.S. and China. The confrontation between China and India, in which India has banned numerous Chinese apps, escalates tensions.

Moore’s Law: As chips advance, the price of technology products has tended to decline over time (i.e. Moore’s Law). Many wonder whether Moore’s Law is slowing, and if it is, what the impact will be on innovation over the long-run.

Macroeconomic factors: While it’s hard to generalize, technology is sometimes considered a cyclical and “high beta” sector. This means it functions well when there are low interest rates, and there is a rise in disposable income. However, it can perform especially poorly when the economy is bad. I.T. spending and risky tech investments are sometimes the first to go when budgets are slashed due to a recession.

Platform innovation: The technology sector tends to create the most value for investors (and society) after there’s been a large-scale platform innovation (e.g. Shift to Mobile, Shift to Cloud, etc.). With fundamentally new and innovative technology, often there is a wave of opportunity for new companies to build on top of it.

Technology Investment Banking League Tables

Traditionally, the most competitive and respected investment banks for technology are bulge bracket banks Goldman Sachs, Morgan Stanley, and, JPMorgan. These firms compete for blue chip, mega deals each year.

In the US, the prestigious boutique Qatalyst is also considered a top tech investment bank. During the tech boom of the 1990s, its creator, Frank Quattrone, assisted in bringing dozens of tech firms, including Cisco and Amazon.

Upscale boutique shops like Lazard, Evercore, Moelis, and Centerview are also great investment banks for technology.

Investment banks serving the upper middle market with a focus on technology include Harris Williams, William Blair, Jefferies, and Raymond James.

Typical day in the life of a Technology Investment Banker look like?

Hours tend to vary across banks and banking groups, but you can generally expect your work life balance to be similar to typical investment banking experience.

Depending on your level, it’s not uncommon to get to work at 930am and leave by 10pm or later.

During your day, you’ll work on a combination of live deals, pitch books, and financial modeling. Depending on your role, you may be asked to join calls or meetings with clients. However, the more junior you are, the more likely you’ll focus your time on executing your work.

Note, there can be large differences between what you’ll do in a small boutique bank and what you’ll do in a larger or more established bank.

As a general rule, at smaller boutique banks focusing on technology, you will work with smaller tech startups seeking financing. This means the deals can be focused on private placements.

Meanwhile, in larger banks and upscale boutiques, you will get to work with substantial-tech businesses on M&A deals, leveraged buyouts, and occasionally debt issuances.