Making the switch from banking to fintech
By the summer of 2010, Kunal Nandwani could reasonably claim that he had weathered the worst of the banking crisis and come out
He was working for Lehman Brothers in London when the bank collapsed, and he moved to Nomura when the Japanese investment bank took over parts of Lehman’s European operations.
Less than two years later, he was a vice-president in Nomura’s electronic and algo-trading division in London and was making a handy six-figure salary.
But work had really slowed down since 2008. Stricter regulations and tighter budgets meant a lot of product innovation had to be put on hold, and Nandwani began to feel disenchanted. At the same time, the industry continued to shed jobs and the City’s mood remained sombre.
Spotting an opportunity in the fintech market, in August 2010 Nandwani quit and moved back to India where he and three friends set up uTrade Solutions, a start-up that develops trading technologies.
He said: “I just left to try to do something different, which may or may not work, but at least I would be satisfied that I did try rather than continuing in a constantly slowing down banking career.”
The start-up, which is in the process of setting up shop in London, currently employs 35 people. But Nandwani said that turning an idea into a fast-growing company proved a lot harder than he could have imagined.
He said: “It is a whole different world. Whatever you estimate, it takes you twice as long to do. It’s good to be optimistic but it’s only by doing it that you learn the realistic scenarios.”
Like Nandwani, many in London’s growing fintech cluster have left a career in investment banking to jump into the uncertain world of early-stage companies. The moves are often a reflection of the banking industry’s low post-crisis morale.
The latest City Job Satisfaction survey by Financial News found that almost 65% of those with 11 to 20 years of experience in investment banking said they were reconsidering their future in the industry.
Yet, although switching from banking to a start-up brings more flexibility and the excitement of creating a new business, the hours are just as demanding and a wide range of responsibilities must be juggled. Stu Taylor left his job as global head of matched principal trading in fixed income at UBS in 2012 to launch Algomi, a fintech company that helps banks find matches for bond orders.
When talking over the career change with his family before the move, Taylor said he expected he would be able to spend more time at home. He realised that was not the case as soon as Algomi’s commercial operations really started to take off.
He said: “The intensity of the work is something you can’t describe. Only somebody who has invested in, or owns, or is responsible for a company can really feel like that. It’s all-engrossing.”
Entrepreneurs said that the pressure comes from knowing that much of the start-up’s fate can rest on their decisions and hard work.
Start-up failure rates only add to the pressure. Fintech start-ups are twice as likely to go bust in their first year than other UK start-ups, according to a recent report by consulting firm Accenture.
The switch also means moving from a job with vast human and financial resources at your disposal, to initially serving as your own IT manager, HR specialist, operations expert, sales executive, accountant and personal assistant.
George Kaye, the founder and chief executive of Derivitec, a derivatives analytics start-up, drew the contrast between the abundance of resources when he was a quantitative analyst at several top-tier banks and lack of them at his start-up.
He said: “When you work in an investment bank, you have all sorts of departments on hand. The lack of manpower is the first thing you notice.”
As start-up founders begin to enlist staff, however, they must learn another skill – managing people with a different work culture from the one they have grown used to in investment banking, entrepreneurs said. Nick Hungerford, a former Brewin Dolphin and Barclays director who is the founder and chief executive of online investment management firm Nutmeg, said: “You carry your culture with you and you are shaped in your early years of employment. I don’t think it’s all bad, I think it takes an appreciation to understand that not everyone is built like you. You have to have the self-awareness to understand that your way is not the best for everybody.”
A smaller operation may be a great responsibility, but it also confers much more freedom to get things done, which is, for many, a fundamental source of motivation. Smaller organisations lack the intricate politics of large corporations, leading to swifter decision-making, entrepreneurs said.
Nick Simpson is chief executive and founder of Finlytics, which provides middle-office technology to financial services firms. He left his position as global head of product control for IT at Deutsche Bank after cashing in his bonus check in February 2006.
He said: “I will never forget the first year of when we started, losing those handcuffs, because it felt like that, and being able to do, not what you wanted to, but what you felt was appropriate to really get into that market and you are working with a team that you’ve chosen.”
Motivation is crucial because leaving an investment bank also means – at least initially – giving up the security of large pay cheque, entrepreneurs said. In fact, there will probably be no pay at all for founders during the company’s infancy, let alone paid holidays, corporate pension plans and lunches on expenses.
Louise Wilson left her role as head of equity capital markets for Europe, the Middle East and Africa at Swiss lender UBS in July 2008. Nearly two years later, she co-founded Abundance, an online platform to invest in renewable energy projects.
Wilson, who was on Financial News’ 2007 list of the 100 most influential women in finance, said: “I certainly live on a lot less than what I did when I was in banking. But my quality of life is better, despite being a lot poorer at the moment.”
Although the amount of work required is not less than when she was in banking, Wilson said she has more flexibility and can devote time to her daughter.
First-time entrepreneurs also said that at first it is easy to underestimate the amount of funding that a company will need to survive.
Although financing for fintech ventures in the UK has grown over the past years, it still has a long way to go. Fintech companies in Silicon Valley raised $950 million in venture funding in 2013 alone, while investment in the UK and Ireland since 2004 has only reached $781 million, according to the Accenture report.
The scramble for funding and the day-to-day management of cashflows can make the pressure on start-up founders just as bad as in their banking jobs, they said. The different morale in their new working environment can help to drive their efforts, they said.
Paolo Malaguti is the founder and director of fintech start-up Aston Corp Analytics and former associate director of leveraged capital markets at Mizuho. His company is based at Level 39, Canary Wharf Group’s start-up accelerator space on the 39th floor of One Canada Square.
Malaguti said: “There might be the same pressure you could find on a trading floor in a building across the road, but here the spirit is more positive and the attitude is much more a ‘can-do’ one. This is something you can easily perceive when you change.”