This article appears on Red Herring today. Could you imagine Gordon Gekko as an entrepreneur? what kind of business would he start? He definitely wouldn’t do clean tech. He couldn’t care less about the environment. I think he would start some sort of a hardware company. Maybe networking. He comes across as a no nonsense kind of investor. He probably wants to touch and feel the stuff his investing in. All jokes aside, I think this is a brilliant idea!… for the most part (more on that later). But, seriously, I think Bloomberg should run for president.
Think about it. Hundreds, if not thousands, of investment bankers have been displaced from their jobs. What do we know about bankers? They are usually young, greedy, smart, motivated, competitive, and… did I say greedy? I meant hungry. These are usually sub-30 professionals who can put in some serious hours to get [expletive] done. If you are a VC, you’ve got to love that.
A few problems though. There may be some engineering or CS majors who’ve gone into banking out of college or out of B-school, but c’mon, the non-technical backgrounds of most of these people have to raise a red flag to investors. I suppose they could try to start businesses that aren’t technology-driven. After all, there are plenty of successful companies that are based on the old fashion model of selling physical goods, right? We have Wal-Mart, Home Depot, Target, etc. However, when was the last time you’ve seen a VC get a 20x on a non-IT business? Never. Okay, not never, but it’s usually rare
Mr. Bloomberg. I applaud your move. I think it’s a fantastic idea. However, if you want this to succeed, you must partner these ex-bankers with some smart engineers or scientists. At the end of the day, bankers are hungry, but they aren’t necessarily risk-takers. They are deal makers who go after attractive companies and make quick money by selling them to other buyers. They may not want to build something from nothing. Also, in his book The Art of the Start, Guy Kawasaki says that one should beware of “big-company disease.” A lot of these bankers who once worked for prestigious Wall St. firms are likely to jump ship at the first sign of economic recovery and abandon their start-up gigs for a nice comfortable high-rise office building and a hot assistant.
So maybe it sounds like I almost convinced myself that this isn’t a brilliant idea. Well, I still think it’s at least a good idea. After all, bankers may be willing to embrace more risk now that there’s virtually no opportunity cost.
By: Jonathan Lee