Investment in technology companies has boomed and it is marking a significant shift in the investment banking industry.
New media and the internet are leading a move away from bulge bracket banks toward tech-specific boutiques. Think, Qatalyst Partners, and CODE Advisors, focused on this sub-sector of TMT, intending to be the next-gen banks.
Even existing banks are spinning toward internet businesses. Allen & Co., founded back in 1922, made a bet on the tech sector in 2002, around the time when the dot-com bubble was bursting. They got the timing right. As everyone was deserting the sector, they headed to foster a long-term association with companies like LinkedIn, Twitter, Facebook, eventually to underwrite their IPOs.
What’s driving this transformation? The reasons lie in the tech companies’ approach to investment models & funding.
No cross-selling, please!
Many tech startups and established companies are looking for independent valuers and advisors.
Post global financial crisis-era has made bulge bracket firms less appealing due to increased regulation and conflict of interest.
So, tech-wannabe startups have been opting out of bulge brackets to firms who ONLY advise on deals and don’t cross-sell other services. Many banks have also lost their top bankers, as a result, who left the firms to start their boutiques.
Technology companies are finding fewer reasons to ‘go public’. This trend is altering the undercurrents in the investment banking industry.
New dynamics are at play. Different investment models for early-stage investors and funding approaches are being explored. The longer a company takes to go public, early investors have to wait that much to realize returns (given many VCs try to raise funds every 2-4 years). Consequently, private-market activity has ticked up by manifolds. Investors are seeking new paths to liquidity, particularly through M& A route.
In the past, bulge brackets didn’t so much focus on private placements. This has scored an advantage for boutiques to step in and aim for deals that are apparently ‘below the bar’ for bigger banks.
Boutiques have taken this as an opportunity to build close relationships with companies. Some are even doing ‘free work’ for several years, nurturing relationships, to eventually even be a part of underwriting IPOs for them.
New Bankers: Don’t stress, Score tech experience.
Senior professionals and entrants seeking a stake in the game can join these boutique internet or new media banks. As a professional in tech-specific banks, you will manage a cornucopia of portfolios and sectors, the businesses are catering to.
What do you need? Along with acing basic technical and industry ‘fit’ questions, showing tangible proof of your interest in the tech sector can get you in.
- Counting only on traditional routes to education and skilling is not enough anymore. They can be long and not be updated enough par the swiftness with which industry is changing. Getting certified with industry-recognized qualifications can equip you with new trends and give you a ‘tangible’ proof of your expertise. Chartered Investment Banking Professional (CIBPTM) is one latest versant qualification acquaint with a mix of ‘new’ and ‘old’ for banking professionals.
- Other than qualifications, you can take part in tech-related groups and activities.
- You can write a few papers on the industry; take part in hackathons.
Your internet presence
No, it’s not about tweeting and posting pictures on Instagram. Neither it is about video resumes.
Maintaining a good LinkedIn profile can suffice. A few tips:
- Put up a professional photograph on a simple background (preferably kitted out in business attire),
- Get about 100 connections as proof of your network,
- Put up a functional title and summary with buzzwords such as strategic planning, investment banking, and so on,
- Ideally, you should have a clear LinkedIn URL (with full name).
Lure of the internet and new media space will become sharper in the times to come. Being prepared is how you can make it!