Investment Banking: Top Exit Opportunities

Investment banking exit opportunities

For those who want to leave the industry, investment bankers typically have incredible exit opportunities. 

Many industries and employers love hiring investment bankers, because they value the training and work ethic that comes from working in investment banking roles.

Popular exit destinations include:

• Private equity
• Growth equity
• Venture capital
• Hedge funds
• Corporate development & strategy
• Startups
• Tech companies
• MBA program

Below I will profile each of these. 

Why are investment bankers in high demand?

Before I discuss these roles, let’s first cover why investment bankers are in such high demand.

The investment banking role provides an exceptional training opportunity, especially for young professionals. 

This program exposes analysts to the intricacies of corporate finance, financial modeling, communication, and client relationship management, among others. The hands-on experience and responsibilities given to analysts from a young age sets them apart from others in their peers.

Investment banking analyst programs (for entry level employees) is widely recognized as a rigorous and comprehensive training ground that prepares individuals for a successful career in finance. 

I often say that you can’t find another job that will give you more responsibility as a 22-year old than investment banking.  Which other job would entrust a 22-year old with running the financial model on multi-billion dollar transactions?

That’s what it boils down to: investment banking roles provide incredible experience and great learning.

What are the exit opportunities for investment bankers?

There are many great exit opportunities for investment bankers who are ready for a change.

However, before I go into more detail on each of these, I just want to say briefly that just because these are roles that investment bankers COMMONLY go into after banking, they are by no means the ONLY things you can do after banking.  

Many employers across lots of different industries respect and value the skillset and training provided by investment banking stints, so feel free to dream bigger than this list!

Private Equity

Why private equity investing is not a terribly difficult question to answer for many investment banking professionals. 

In private equity, individuals can expect to be involved in many of the same tasks they did in banking, but with higher expectations of precision – e.g. sourcing new investment opportunities, conducting due diligence, negotiating terms, building financial models, and managing portfolios. 

Many private equity roles allow you to work closely with senior management, entrepreneurs and founders, providing valuable support to drive the success of investments and portfolio companies. 

Like investment banks, private equity firms are known for their rigorous and challenging work environment.  However, the worklife balance tends to be better than in investment banking roles.  

In part, this is driven by the fact that on the buyside you are driving the schedule of deals and have greater visibility into the future.  As an investor, there’s also no pitching for new business, which can relieve the workload!

Growth Equity

Investment bankers are also hot commodities for growth equity firms.

Growth equity firms are similar to private equity firms in that they invest in private companies; however, instead of focusing on leveraged buyout transactions, they target companies that are fast growing and are typically at an earlier stage of development. 

In growth equity, former bankers can expect to use several of their skills honed in investment banking – e.g. building financial models, analyzing and evaluating business models, etc.  However, you will also proactively reach out to new companies to try to source new investment opportunities.  

Like in private equity, you will also spend much of your time supporting your portfolio companies in any way you can. However, as a growth equity investor, you typically own a minority stake in the company (rather than control / majority stake), which can limit your ability to influence the day-to-day operations of the company. 

This role requires a strong understanding of financial modeling and market analysis, as well as a deep understanding of the growth drivers for different industries. 

Check out this article if you like to go deeper on the differences between growth equity and private equity.

Venture Capital

Venture capital firms often target former investment bankers to join their ranks.

While many early stage venture capital investments do not require in-depth modeling, venture capitalists still value the financial training and rigor developed in investment banking professionals. 

By working in venture capital, you can get much closer to cutting-edge startups and early-stage companies; whereas most investment banking roles target large clients, who can afford expensive investment banking services. 

In venture capital, individuals can expect to be involved in sourcing new investment opportunities, conducting market research, and supporting portfolio companies with their growth strategies. 

Venture capital firms operate in a fast-paced environment and offer investment bankers the opportunity to be part of a dynamic and entrepreneurial community.

Hedge Funds

Another buyside investing role that heavily recruits from investment banking programs is hedge funds.

Instead of investing in private companies (as you might in private equity and growth equity), hedge funds usually invest in publicly traded debt or equity securities – though there are many strategies. 

In hedge funds, individuals can expect to be involved in conducting research and analysis, managing portfolios, and executing trades. 

While every hedge fund has its own culture, many are quite fast paced.  If you invest in public stocks, every day you will have a score board to see how well your investments are doing.  This can be great for some, but also too much for others. 

This is quite different than private equity, growth equity, and venture capital – in all of these it can take 5-10 years to really understand how well your investment has done.

If you’re interested in both private equity AND hedge funds, it’s typically wiser to try doing private equity first.  Often, it is easier to go from a private equity role to a hedge fund than it is to do the opposite transition. 

That’s because private equity diligence and deal processes (focused on private companies) require a quite different skillset than that of hedge funds (focused on just buying shares).

Corporate Development

Another great exit for investment bankers is to go into corporate development roles.

Corporate development roles are typically responsible for running acquisitions or strategic projects within a company.  These roles provide investment banking professionals with an opportunity to use the deal making and analysis skills they’ve developed within a specific company or corporation, as opposed to working at a financial institution. 

Besides mergers and acquisitions, corporate development roles drive strategic initiatives like partnerships, joint ventures, and other growth initiatives. 

Often, these roles have the opportunity to work closely with senior management, providing valuable insight and support to help drive the success of the company. 

My take: corporate development jobs can be great exits for investment bankers and can be very exciting for a few years, but they can have somewhat limited career progression if you want to get senior.  There’s not a clear path to higher levels (e.g. CFO hires typically comes from pure finance roles within a company).  Very few companies have a “chief corp dev officer.”

Startups

Especially lately, many investment bankers find it quite alluring to work in startups after their stint in banking.

Speaking from experience, I can remember when I was an investment banker, working in startup with lots of autonomy and impact sounded like just the antidote to the investment banking analyst role, which at times can seem very hierarchical and can be stifling.  

(Note, despite the temptation, I ultimately did growth equity after banking since it would be harder to do growth equity at a top firm later!) 

Still, working at a startup provides investment banking professionals with an opportunity to work in a fast-paced and entrepreneurial environment. 

In this field, individuals can expect to wear many hats and to be involved in a variety of tasks, from business development and marketing to operations and finance. 

Startups and entrepreneurs often love hiring former investment bankers because they take lots of ownership over their work and they have strong work ethics!

In a small or early stage startup, often the roles are very fluid and you do a little bit of everything, so I wouldn’t worry too much about title.  

However, common roles for investment bankers include: finance, business operations, chief of staff, operations, etc.

If you want to do this, find a winning company and figure out a way to get in.  Don’t worry about title.

Tech Companies

Many investment bankers leave the industry to take roles at mature tech companies like Apple, Google, Facebook, and Microsoft.

The roles to shoot for in such a transition include: FP&A, strategy, business operations, operations, partnerships, and corporate development. 

Many former bankers are interested in product management.  I should know – I was once a banker, and later did product management at Airbnb, a portfolio company of General Atlantic. 

This transition is theoretically possible; however, it can be challenging.  While the roles attract similarly ambitious people with leadership skills, product management requires quite different skills from investment banking.

Anyway, the best way typically to transition to product management is by getting another role (like the ones listed above) at a company and then work closely with product and eventually transfer in.

Strategy

Strategy roles within a company (or at a consulting firm) are also possible for investment bankers. 

While it is somewhat less common for investment bankers to trade their roles for a management consulting role, it does happen (I know of several who’ve done it).  This could occur if you were torn about the two coming out of undergrad or MBA and you didn’t love your investment banking experience. 

Many investment bankers also take “strategy” roles within companies.  These roles can be quite exciting, but on the downside they can also be somewhat nebulous (often involved in “advising or providing the CEO” or some other decision-maker). 

While these roles can be highly influential in many companies, I do not typically advise these roles in typical “tech” or “startup” environments.  That’s because, while “setting the strategy” sounds exciting, it is often false advertising. 

The CEO sets the overall strategy, and typically product managers help set “on the ground” strategy (e.g. what gets built etc).

That said, these roles can be very rewarding and impactful in the right situation with the right setup.

Business school (MBA)

Of course, you can also apply for a business school after an investment banking analyst program.

This is a great option for some who want the experience of b-school.

However, if you aren’t sure what you’d like to do yet in the long-term, I typically advise trying something else after banking before applying to business school.  It’s basically a free option.  You can always apply to school after you do that.

Besides, business schools are tending to prefer candidates who can bring more experience and life to class conversations (e.g. more than just 2 years of experience).

However, this advice is definitely not for everyone, and everyone’s situation is different.

Why do most investment bankers quit or leave?

Many investment bankers seek to leave the industry because of a combination of factors including:

• Attractive exit opportunities – as described above, there are several attractive opportunities they can leave to do (e.g. private equity, growth equity, etc)
• Difficult work-life balance in banking – the hours of investment banking are legendary and grueling; many roles offer better work life balance
• Roles are designed to be temporary – most investment bankers leave after the two-year analyst program, which is designed to be two-years.  While some banks have started re-thinking whether great analysts should be “pushed out” after two years, this is still the standard today.

Do investment bankers get fired a lot?

Investment banking is a highly competitive industry, so there are very high performance expectations.  Each investment bank sets their own standard for performance management.  

Some banks are believed to routinely “fire” or “let go” the worst performers; however, this typically a small percentage of the overall employee base and it should not scare you away from entering the industry.

It is possible that, during industry downturns, there can be reductions in employee workforce.  In such situations, investment banks can trim or reduce their expenses, resulting in firings.

Is it worth it to leave investment banking? 

The answer will be different for everyone.

Leaving investment banking can be a complex decision that requires careful consideration of personal goals and aspirations. 

As an analyst, unless you have a strong and unwavering desire to pursue a long career in investment banking (some people do!), or if your current investment banking team is truly great and fulfilling, I personally advise most people to explore other career paths after doing an analyst program. 

You have so many great options, as we’ve discussed!  Why wouldn’t you try something new, or at least, see a different part of the financial world?

You can always (usually) go back to investment banking if you really want to.  Example: a friend of mine, who was an analyst at Morgan Stanley, left to pursue private equity and went to business school at a top 10 school. After gaining additional experience and education, he actually decided to return to investment banking and is now very happy with his career choice.