About Investment Banking Business Model
Investment Banking: A Quick Overview 💰
Investment banking is a specialized sector of finance that helps companies, governments, and institutions raise capital and execute financial transactions. It involves mergers & acquisitions (M&A), IPOs, corporate financing, and advisory services.
1. What Investment Banks Do 🏦
Investment banks act as financial intermediaries, helping clients with:
✅ Capital Raising (Equity & Debt Financing)
✔ Issuing stocks (IPOs, secondary offerings)
✔ Raising debt (bonds, loans, credit facilities)
✅ Mergers & Acquisitions (M&A) Advisory
✔ Helping companies buy, sell, or merge
✔ Conducting valuation & due diligence
✅ Trading & Market Making
✔ Buying/selling stocks, bonds, derivatives for clients
✔ Providing liquidity in financial markets
✅ Asset & Wealth Management
✔ Managing investments for high-net-worth individuals (HNWIs)
✔ Running hedge funds, mutual funds, & private equity
✅ Restructuring & Risk Management
✔ Advising companies on bankruptcy, turnaround strategies
✔ Managing financial risk (interest rates, FX exposure, etc.)
2. Top Investment Banks 🏦💼
The industry is dominated by bulge bracket, middle-market, and boutique investment banks.
🔹 Bulge Bracket Banks (Global Giants)
These are the biggest banks handling multi-billion dollar deals.
✔ JPMorgan Chase
✔ Goldman Sachs
✔ Morgan Stanley
✔ Bank of America Merrill Lynch
✔ Citi
✔ UBS
✔ Credit Suisse (now part of UBS)
🔹 Middle-Market Banks (Mid-Sized Deals)
These banks handle $50M–$500M transactions.
✔ Jefferies
✔ Houlihan Lokey
✔ Raymond James
✔ William Blair
🔹 Boutique Investment Banks (Niche Focus)
Smaller banks specializing in M&A or specific industries.
✔ Evercore
✔ Lazard
✔ Moelis & Co.
✔ Centerview Partners
3. How Investment Banks Make Money 💰
Investment banks generate revenue through:
✅ Advisory Fees – M&A and restructuring advisory
✅ Underwriting Fees – IPOs & bond issuances
✅ Trading Profits – Buying & selling stocks/bonds
✅ Asset Management Fees – Managing funds & wealth
✅ Interest Income – Loans & credit to clients
🔹 Example: If an investment bank helps a company go public (IPO), they take a 2%-7% fee on the money raised.
4. Careers in Investment Banking 💼
Investment banking is high-paying but demanding, with long hours (80-100 hours/week).
🔹 Common Roles & Hierarchy
1️⃣ Analyst (Entry Level) – Data analysis, PowerPoint slides, financial modeling
2️⃣ Associate – Manages analysts, client interactions
3️⃣ Vice President (VP) – Oversees deals, works with clients
4️⃣ Director / Senior VP – Leads execution of transactions
5️⃣ Managing Director (MD) – Brings in deals, top-level strategy
💰 Salaries:
- Analysts: $100K–$150K (with bonuses)
- Associates: $150K–$300K
- VPs & Directors: $300K–$1M+
- MDs: $1M–$10M+ (mostly from deal commissions)
🔹 Pro Tip: Breaking into investment banking requires strong networking, finance knowledge, and technical skills (Excel, financial modeling, valuation techniques).
5. Key Skills for Investment Banking 📊
✔ Financial Modeling & Valuation (DCF, LBO, Comps)
✔ Excel & PowerPoint Mastery (Building pitch decks & models)
✔ Negotiation & Communication (Closing deals)
✔ Market & Industry Analysis (Staying ahead of trends)
✔ Strong Work Ethic (Expect 80-100 hour work weeks)
🔹 Pro Tip: Getting into investment banking usually requires an MBA, CFA, or experience in finance roles.
Final Thoughts
Investment banking is a high-risk, high-reward career with strong earning potential and global influence on financial markets.
How to Start a Career in Investment Banking (IB) 💼💰
Investment banking is one of the most competitive and lucrative careers in finance. It offers high salaries, prestige, and global opportunities, but also long hours and high pressure. Here’s a step-by-step guide to breaking into IB and excelling in your career.
1. Understand the Investment Banking Career Path 🚀
Investment banks have a strict hierarchy. Here’s how careers progress:
🔹 Entry-Level Roles
1️⃣ Analyst (0-3 Years, $100K–$150K) – Financial modeling, presentations, deal support
2️⃣ Associate (3-5 Years, $150K–$300K) – Manages analysts, deeper client interactions
🔹 Mid-Level Roles
3️⃣ Vice President (5-10 Years, $300K–$600K) – Leads deals, works closely with clients
4️⃣ Director / Senior VP (10-15 Years, $500K–$1M) – Manages multiple deals, team leadership
🔹 Senior-Level Roles
5️⃣ Managing Director (15+ Years, $1M–$10M+) – Brings in deals, top decision-maker
🔹 Pro Tip: Most people exit IB at the Associate or VP level to join private equity, hedge funds, venture capital, or corporate finance.
2. Educational Path: What You Need to Get In 🎓
To break into IB, you need a strong finance background and top-tier education.
✅ Best Degrees for Investment Banking:
✔ Finance, Accounting, Economics, Business (Most common)
✔ Engineering, Mathematics, or Physics (For quantitative roles)
✔ MBA (For career switchers or Associates level entry)
✅ Target & Semi-Target Schools:
Investment banks heavily recruit from Ivy League & top business schools like:
📌 Harvard, Wharton, Stanford, Columbia, MIT, Yale, Oxford, Cambridge
📌 Semi-targets: NYU Stern, USC Marshall, LSE, Georgetown, Michigan Ross
🔹 Pro Tip: If you’re not from a target school, networking & internships are critical!
3. Gain Relevant Experience 🏢
✅ Internships (The Most Important Step!)
💡 Summer Analyst Internship (Junior Year of Undergrad) – Best way to land a full-time job
💡 Fall/Spring Part-Time Internships – Helps if you don’t get a summer internship
✅ Alternative Experience (If You Missed an IB Internship)
✔ Private Equity / Hedge Fund Internships
✔ Corporate Finance / Big 4 Accounting (Valuation, M&A groups)
✔ Equity Research or Asset Management
🔹 Pro Tip: If you missed an IB internship, consider a Master’s in Finance to reapply.
4. Master the Key Skills for IB 📊
Investment banking is technical and relationship-driven.
✅ Financial Modeling & Valuation:
- DCF (Discounted Cash Flow)
- Comparable Company Analysis (Comps)
- Precedent Transactions Analysis
- LBO (Leveraged Buyout) Modeling
✅ Excel & PowerPoint:
- Build financial models quickly
- Create pitch decks for clients
✅ Networking & Communication:
- Build relationships to land interviews
- Effectively present deals to clients
✅ Market & Industry Knowledge:
- Understand M&A, IPOs, capital markets trends
🔹 Pro Tip: Master Excel shortcuts and learn financial modeling through online courses (Wall Street Prep, Breaking Into Wall Street).
5. Network Aggressively 🤝
Most investment banking jobs aren’t advertised—they come from networking.
✅ How to Network:
✔ Cold Email & LinkedIn Messages – Connect with IB professionals for coffee chats
✔ Alumni Outreach – Ask for career advice & referrals
✔ IB Networking Events & Conferences – Meet recruiters in person
🔹 Pro Tip: Aim for 100+ networking calls before applying to maximize your chances.
6. Ace the Investment Banking Interview 🎤
IB interviews are intense, with technical, behavioral, and case study questions.
✅ Common Technical Questions:
✔ Walk me through a DCF valuation
✔ How do you calculate Enterprise Value vs. Equity Value?
✔ What are the three financial statements, and how do they link?
✔ What makes a good M&A deal?
✅ Common Behavioral Questions:
✔ “Why Investment Banking?”
✔ “Tell me about a time you worked under pressure.”
✔ “Walk me through your resume.”
🔹 Pro Tip: Prepare for Superday Interviews (multiple rounds in one day with different bankers).
7. Apply to Investment Banking Jobs 🏦
Once you’re ready, apply to:
📌 Bulge Bracket Banks: JPMorgan, Goldman Sachs, Morgan Stanley, Citi
📌 Middle Market Banks: Jefferies, Houlihan Lokey, RBC Capital Markets
📌 Boutique Banks: Evercore, Lazard, Moelis & Co.
✅ Apply through campus recruiting, online portals, or referrals.
🔹 Pro Tip: Start applying 1 year in advance (IB recruitment is very early!).
8. Prepare for Long Hours & a High-Stress Environment ⏳
💼 Expect 80-100 hour workweeks (especially as an Analyst)
📉 High pressure to meet deadlines & deal closings
📈 BUT: Huge salary potential & career exit options!
🔹 Pro Tip: Many leave IB after 2-3 years for private equity ($200K+), hedge funds, or entrepreneurship.
Final Thoughts
Investment banking is one of the most rewarding finance careers, but it requires strong academics, technical skills, networking, and endurance.
How to Start Your Own Investment Banking Firm 🏦💼
Starting an investment banking firm is a high-reward but complex venture. It requires capital, licensing, strong industry connections, and expertise in financial advisory services like M&A, capital raising, and debt restructuring. Here’s a step-by-step guide to help you launch your own investment banking firm successfully.
1. Define Your Niche & Services 🎯
Investment banks provide various financial services. Decide on a niche based on your expertise.
✅ Common Services for Boutique Investment Banks
✔ Mergers & Acquisitions (M&A) – Advising companies on buy/sell transactions
✔ Capital Raising – Helping businesses get funding through equity or debt
✔ IPO Advisory – Assisting companies in going public
✔ Debt Restructuring – Helping companies manage financial distress
✔ Valuation & Strategic Advisory – Providing financial modeling & valuation services
🔹 Pro Tip: Start as a boutique firm specializing in M&A or corporate finance before expanding.
2. Obtain Licenses & Regulatory Approvals 📜
Investment banking is heavily regulated, so you must comply with local financial laws.
✅ Key Licenses & Registrations (U.S.)
✔ FINRA Membership & Broker-Dealer License (For securities transactions)
✔ SEC Registration (If handling large securities offerings)
✔ State & Federal Compliance (Check SEC & local regulations)
✅ Other Countries’ Regulatory Bodies:
📌 UK – FCA (Financial Conduct Authority)
📌 EU – ESMA (European Securities and Markets Authority)
📌 Canada – IIROC (Investment Industry Regulatory Organization of Canada)
📌 India – SEBI (Securities and Exchange Board of India)
🔹 Pro Tip: Work with a securities attorney to navigate the licensing process.
3. Build a Strong Team 🤝
Investment banking relies on expertise, credibility, and relationships.
✅ Key Hires for Your Firm
✔ Managing Partners – Experienced bankers who bring in deals
✔ Analysts & Associates – Handle financial modeling & research
✔ Legal & Compliance Experts – Ensure regulatory compliance
✔ Sales & Business Development – Attract clients and investors
🔹 Pro Tip: Bring in senior bankers with strong industry connections to establish credibility.
4. Secure Capital & Infrastructure 💰
Starting an IB firm requires substantial capital for licensing, staffing, and operations.
✅ Funding Sources:
✔ Personal Savings & Partner Investments
✔ Angel Investors & Private Equity Backers
✔ Bank Loans or Credit Lines
✅ Office & Tech Requirements:
📌 Office Space (Or remote setup if starting small)
📌 Bloomberg Terminal / Financial Data Tools (Expensive but necessary)
📌 Legal & Compliance Software (To manage regulatory filings)
🔹 Pro Tip: If you’re starting lean, operate as a remote boutique advisory firm before expanding.
5. Develop a Strong Brand & Website 🌍
Your reputation is everything in IB. Build a professional brand that attracts clients.
✅ Essentials for Branding & Online Presence:
✔ Professional Website – Showcases services, expertise, and client testimonials
✔ LinkedIn & Social Media – To network with potential clients
✔ Pitch Deck & Marketing Materials – For investor presentations
🔹 Pro Tip: Publish industry reports & whitepapers to build credibility as a thought leader.
6. Network & Find Clients 🤝
Clients in investment banking come from strong relationships rather than ads.
✅ How to Get Your First Deals:
✔ Leverage Past Clients & Industry Contacts
✔ Attend Financial Conferences & Networking Events
✔ Partner with Law Firms & Accounting Firms (Referrals)
✔ Cold Outreach to Mid-Sized Companies Seeking M&A or Capital Raising
🔹 Pro Tip: Focus on small to mid-sized companies ($10M–$500M) that need investment banking services.
7. Build Strategic Partnerships 🤝
Your firm can grow faster by partnering with larger banks & financial institutions.
✅ Potential Partnerships:
✔ Private Equity & Venture Capital Firms – They need IB services for deal structuring
✔ Law & Accounting Firms – Source M&A and restructuring deals
✔ Commercial Banks – Provide financing options for your clients
🔹 Pro Tip: Position yourself as a specialist boutique firm to attract high-value partnerships.
8. Execute Deals & Scale Your Firm 📈
Once you land clients, focus on delivering successful transactions and scaling operations.
✅ Scaling Strategies:
✔ Expand Service Offerings (e.g., Debt Advisory, IPOs)
✔ Hire More Senior Bankers (To bring bigger deals)
✔ Enter New Markets (International expansion)
🔹 Pro Tip: A track record of successful deals attracts more clients and investors.
Final Thoughts 💼
Starting an investment banking firm requires expertise, licensing, strong networks, and capital. If done right, it can be a highly profitable and influential business.
