Just over a year ago I sat down with my boss and told him I needed a career change. I'd been working in equity sales for nearly ten years, and had spent the last seven trying to get out of it. I was finding it difficult to do a job I did for money when there was now much less money to be had from it. Also, I'd begun to envy friends in fields like law who had professional opinions that others actively sought and for which they would pay good money.
What I wanted to do was this: set up a business that gave advice to private companies on finding capital. Why?
- Many in banking are brilliant at giving advice to companies, but are not so good at dealing with investors and finding money.
- Capital is in short supply right now, particularly for private companies.
- Fees - raising capital is the most profitable part of the financial services pie. Let's now consider each of these points in turn.
Private companies and their bankers will often pursue transactions that serve their own purposes first and those of investors second. But if they don't take account of the wishes of investors then deals might not get done - it's as simple as that. The best bankers take into account the wishes of both companies and investors.
But very few of those advising private companies on raising capital have investor address books that extend much beyond the private equity firms everyone is familiar with, which creates an opportunity for someone prepared to devote the time and resources to build one.
Shortage of capital
Across the board companies are finding it increasingly difficult to access funds, especially those at the smaller end of the spectrum. Every week I meet a company management team with the same complaint: "We make money, we generate cash, we have a healthy balance sheet. I need to borrow money
but no-one wants to know." Right now it's easier for a bank and its endless credit committees to say no. Some well-known banks have even embarked on credit reduction programs, cutting the fat from loan books that they gorged on at the height of the pre-crunch boom (for example, shipping and student loans).
But potential investors exist even in this climate - you just have to know where to look.
As capital is in short supply, companies have no choice but to pay a premium for it - and larger fees to their advisors.
So who should companies be turning to now for capital? Hedge funds, at one time the first port of call for bankers looking to place private transactions, have retreated rapidly in recent years.
Private equity firms have plenty of money (some $350 billion of it at the latest reckoning) that they need to spend if they're to generate fees for themselves, but they suffer from an image problem. All too often I'm told by owners of private companies: "I don't want to do a deal with private equity - they'll screw me for everything I have." This view is not necessarily accurate, particularly when it comes to the smaller firms who need to incentivise management teams, but dirt takes time to shift. Furthermore, the private equity industry is finding its own access to debt restricted.
So who is stepping into the breach? We're seeing the rise of two new breeds of investor:
- Credit funds looking to lend directly to private companies rather than to other funds.
- High net worth investors sick of the high fees and poor performance of funds seeking to put their money directly into private companies instead. As long as interest rates remain near zero and fund performance mixed, the attractions of putting money to work directly in private companies are clear.
Where I am now
Right now my business is in its infancy, but I have every confidence that it's the right path. I'm possibly unusual in having taken nearly 12 years to find a job I believe in, and I sometimes wonder if I should have done things differently. But many people will always be in the wrong job, and so perhaps I'm one of the lucky ones.
Finding the right job is all about attuning your personality and abilities to the demands of a particular role. Work out what a job entails and what makes you tick, and if the two seem complementary then you might want to try it. And well-reasoned arguments as to your personal suitability for a role will put you at an advantage over other applicants at interview.
But it's not just the interviewer you should consider. There's someone rather more important - you. People overlook this fact in their desperation to land the top jobs. Before you commit yourself, step back and establish what makes you happy. There's no point trudging to work every day weighed down by the miseries of the world. These days a career may not be for life, but it does last a very long time.
Better to get it right than spend the next 30 years wondering what might have been.