Why Wall Street talent is moving to Silicon Valley

Less than a decade ago, top talent was flocking to Wall Street — not just for the high salaries and lucrative bonuses, but also for the opportunity to work in a dynamic and fast-growing environment.

But now the tech industry, with its double digit growth, is setting a new standard on what the ultimate dream job looks like, with its tales of young entrepreneurs-turned-millionaires overnight — and of game rooms and lounges alongside brainstorming corners and innovation workshops.

Tech companies have become the new desirable destination, not only for top programmers but for leading Wall Street executives, too. And with successful IPOs from the likes of Twitter, Facebook, and LinkedIn, Silicon Valley has created giant companies with the resources to pursue and retain top Wall Street talent.

Headline Hires in M&A Land

When Marissa Mayer became Yahoo’s chief executive in 2012, she hired Jacqueline D. Reses, a former Goldman banker, as the company’s chief development officer. Since then, the brain drain from finance has become apparent. Examples abound:

  • Ruth Porat, CFO at Morgan Stanley has recently been snatched by Google.
  • Former Goldman banker Anthony Noto moved to Twitter.
  • Credit Suisse lost tech banker Imram Khan to Snapchat.
  • Former Morgan Stanley securities analyst Mary Meeker is now an analyst at leading Silicon Valley venture capital firm Kleiner Perkins Caufield and Byers.
  • Laurence Tosi left Blackstone Group for Airbnb.
  • Goldman Sachs’ Sarah Friar moved to Salesforce.com, and then to Square.
  • David Wehner of Allen & Co joined Zynga, and then Facebook.

The investment in these hires makes sense from the tech giants’ perspective, since acquiring other companies and expanding into new geographies has become their core growth strategy. And we’re seeing an acqui-hire trend in tech, where giants acquire startups for the sake of raiding their talent. As these complex executions (along with post-merger integration and constant sourcing of deal flow for potential acquisitions) become inherent to their business, tech giants require the expertise of high caliber in-house financial professionals.

Since these companies are all public companies, and all eyes are on them, reporting and compliance become increasingly important — yet another reason to hire in-house bankers.

The active M&A scene in tech creates an ongoing appeal for financial sector professionals to take part in this ecosystem instead of working on deals in more traditional industries. As the tech giants branch out to other geographies such as Europe and Asia, establishing R&D centers in key locations, their visibility into other markets and opportunities expands significantly.

Additionally, the scale of acquisitions has been increasing to multibillion-dollar deals. Consider the $12.5 billion acquisition of Motorola Mobility by Google (which later kept the IP and sold the company to Lenovo for $2.91 billion), among other billion-dollar acquisitions of companies like Waze and Oculus. The famous $19 billion acquisition of WhatsApp by Facebook set another record in tech giant acquisition history. Since then we have seen the $19 billion acquisition of Sandisk by Western Digital and the largest merger in history when Dell acquired EMC for $67 billion. These deals feed into the infatuation with all things tech, creating the right content for talent to migrate from finance.

 

mba talent migration

MBAs Vote Tech

With Wall Street compensation shrinking, recent business school graduates are having difficulty justifying the intense 100-hour banking work week and lack of a work-life balance. Instead, they are choosing the casual work environment and flexibility of tech firms, trading in the Wall Street suit and tie for jeans and a tee shirt.

MBAs are fighting over internships at Google so they can breathe some innovation air as they stroll on campus among smart cars, in-office Segways, and dog-friendly work settings.

Companies like Amazon and Apple are highly ranked employers among MBAs. Last year, only 10 percent of MIT graduates went into finance, compared with the 31 percent in 2006. According to WSJ research, in 2011, 36 percent of Stanford graduates were recruited to finance jobs. This number is comparable to other top finance focused universities, including Harvard, Yale, University of Pennsylvania, and University of Chicago. By 2013, that number had shrunk to 26 percent (a decrease of almost 30 percent). During those years, the tech industry grew dramatically, and in 2013, 32 percent of Stanford graduates took tech jobs compared to only 13 percent in 2011. Although not all of the attrition in finance can be attributed to tech, research by The Economist shows that tech is quite the migration destination.

In the shift to tech companies, Stanford graduates are willing to accept a compensation composed of a lower salary and an equity component in return for a positive work culture and mission. A median tech salary for a Stanford MBA graduate averaged ~$160,000, including signing bonuses and other guaranteed compensation, compared to $285,000 in finance jobs. The delta between offerings is not dramatic, as it is offset by the equity or options component employees receive in the tech sector. Bonuses in the financial sector are nowhere near the millions of dollars pre-crisis, making it harder for MBAs to go for the banking lifestyle and culture for just another $100k a year before taxes. The upside of those tech equity options have the potential of becoming more lucrative and making the overall compensation package worth a whole lot more.

Tech giants are also increasing their East Coast presence, with Google and Facebook growing their New York offices and recruiting an increasing number of MBA graduates.

In 2011, only 5.5 percent of Columbia University graduates went for a job in tech. In 2013, that number grew by 112 percent to 11.7 percent. Giants like Amazon, AppNexus, Facebook, Spotify, eBay, ZocDoc, LinkedIn, and Yahoo have added the most New York City jobs in Q2 2014.

A Growing Trend

The migration of top executives and young talent to the tech scene is a worrying trend for Wall Street. It is possible that the demand for finance will rebound if compensation packages return to pre-2008 standards. However, the shift to tech is much more than just a monetary issue. It has become obvious that lifestyle, autonomy, and the opportunity to work in a high growth industry that is changing the world are important factors. Wall Street and other traditional industries will have to continuously adapt in order to compete with the ever-growing tech industry.

 

This article originally appeared on Venturebeat

What To Look For in Entreprenuers

Recently, iAngels’ Founding Partners, Shelly Hod Moyal and Mor Assia, hosted a webinar for our investor community.  The topic of the webinar was: “What Investors Should Look For in Entrepreneurs”.

The following is a rundown of the key points highlighted during the talk, and you can find a video summary of the webinar below.

The following is a list of ten key points, not in order of importance, outlining what investors should be looking for in entrepreneurs when considering an investment. People talk about team team team all that time, but what are we really looking for?

1. Commitment:

It is critical that the the founder is fully committed to the venture. Bootstrapping or having skin in the game goes to show that the founder is putting his money where is mouth is and is willing to take that personal risk in order to ensure company growth.

2. Research:

It is important to see that the founder has thought this through. The founder needs to show that he has done the market research, looked into the competitive landscape,  and created an ambitious but achievable business plan that is not detached from market standards and expectation. If you can think of a question at an initial meeting that the founder does not know how to answer, the research wasn’t thorough enough.

3. Resilience

Founders need to be exemplars of resilience in order for them to be able to overcome challenges and work well together for many years.

4. Ego

When founders avoid becoming political and are not ego driven, you know that they are focusing on the business and not on their own agenda. It is important to understand the dynamic of the founding team.

5. Vertical Expertise

It is expected that a founder has decided to uproot his life and leave his previous job stability because there is something he is so passionate about, that he cannot live another day without making it a reality. This usually (but not always) means that the founder knows a thing or two about the space he wishes to enter.

Expertise is very important and must be ingrained in the founding team. Working in the specific sector for several years before starting the business, usually shows that the founder has identified a challenge in the space that he is now about to tackle.

6. Track Record

Starting a company is hard, but selling a company or taking a company public is even harder. Out of the global pool of entrepreneurs, there are not too many people who have already succeeded in doing so, and even if they did it is important to realize what returns their previous investors actually saw.

A serial entrepreneur is someone who is able to perform consistently, learns from his previous experience, and is now looking to do things bigger and better. Experienced entrepreneurs bring a lot of know-how into the business and have the ability to see another company through.

7. Diversified Skill Set

When constructing a founding team, there needs to be several pillars in place. Some angels favor companies that have a marketing expert, a technology expert, and a business development expert on board in order to succeed. Having a complimentary skill set in the founding team eliminates ensures the scalability of the company.

8. Fundraising Abilities

The founders need to be able to tell a story.  Young companies are constantly raising money. Inability to communicate the vision, the mission statement, the story and the technology in a way that is audience focused to investors, is a major issue. Execution and meeting KPIs should be what the CEOs are focusing on and as founders are able to conduct successful rounds they are able to get back to business.

9. Personality

Traits such as flexibility and agility will help founders overcome obstacles. Over achievers by nature are relentless and cannot seetle for mediocrity.  Being responsive and respectful of other people’s time shows that the founder is humble and understands the fact that there are many smart people in the world who can help.

10. Visionary

Startup investing is risky. If the vision is not big enough, it might not be worth attempting. Many founders have a good product, but what is going to happen with this product in a year or two from now. Founders not only need to have a product to sell, but they need to understand how to build a company around it. If the founder cannot convince you to buy into his vision, how will he build a successful company around it?

 

How Israel contributed to the major storage industry consolidation

October saw two major acquisitions that rocked the storage industry worldwide. Dell acquired EMC for $67 billion, the largest tech merger in history, and last week, Western Digital bought SanDisk for $19 billion.

As the global giants are enjoying an increase in share value, we cannot overlook the major contribution Israeli innovation and technology has had in these two major plays.

In 2006, SanDisk acquired Israeli M-Systems for approximately $1.5 billion. Dov Moran, known for inventing the flash drive, took M-Systems well into Israel’s prestigious Unicorn Club (startups worth more than $1 billion) and created one of Israel’s big technology success stories.

SanDisk was no stranger to Israel: SanDisk’s co-founder, Eli Harari, is an Israeli himself. Harari knew to push forward and establish leadership in the space. Awarded the National Medal of Technology and Innovation by President Obama in 2014, Eli had a profound impact on the global storage industry.

The acquisition of SanDisk by WD enables the companies to double their addressable market and spread across a variety of solutions, namely hard disk drives, solid-state drives, cloud data center storage solutions, and flash storage.

Considering that this move was announced on the heels of Dell’s whopping $67 billion acquisition of EMC, what we are witnessing is a major consolidation in the storage sector.

Much like WD, Dell now also enjoys Israeli roots.

EMC has acquired multiple Israeli companies over the years. In 2006, EMC bought Kashya for more than $150 million. Kashya, a provider of enterprise-class data replication and protection software was not only EMC’s first Israeli acquisition, it also spawned EMC establishing an R&D center in Israel.

Since then, EMC began gobbling up Israeli companies, acquiring more than ten startups overall for an amount exceeding $1 billion. These included Cyota (through its acquisition of RSA Security in 2006), nLayers (2006), proActivity (2006), Illuminator (2007), Zettapoint (2011), XtremeIO (2012), More IT (2012) and ScaleIO (2013).

These Israeli solutions, which have already been integrated into EMC, will now become part of Dell’s core.

All this feeds directly into the trend we’ve identified when technology giants acquire startups in Israel: It wets their appetite for more Israeli innovation. More often than not, by founding local labs, tech giants find themselves on the ground and able to identify additional opportunities in Israel. Consequently, the companies feel more comfortable conducting additional M&A activity in Israel.

The leadership Israel showcases in the storage space has been an integral strength for Israel for over 30 years, and now this expertise is fueling the growth of two of the world’s IT leaders.

As Israeli entrepreneurs recognize the value tech giants are able to extract from the technology in their proliferation efforts, we expect to see many more acquisitions and unicorns coming out of Israel in upcoming years.

This article originally appeared on geektime

Should You Invest in Alternative Alternatives?

With interest rates at zero and the introduction of crowdfunding-based financial innovations, investors are seeking both alpha and diversification in alternative assets: start-ups, consumer loans, private equity, and real estate projects.

While investors have deployed capital into venture capital and private equity funds, credit funds, and REITs for quite some time, “alternative alternatives” or “A2”, represent the possibility of investing in specific securities within each of these alternative asset classes. Just like the public invests in and lends to public companies through individual stocks and bonds — not just mutual funds, the investing public can now invest in and lend to private companies and individuals through crowdfunding.

Alternatives Went Mainstream, A2 to Follow

Once considered an investment vehicle only for sophisticated, high-net-worth individual investors, alternatives — real estate, private equity funds, hedge funds, managed futures, commodities, and venture capital — have become a standard component of almost every professionally-managed investment portfolio, growing twice as fast as non-alternatives since 2005.

 

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Sharing is Caring: The Rise of Co-working in Israel

The common work space phenomena has taken over Israel.

Entrepreneurs have come to realize that instead of working from their basement, they have the ability to work in a vibrant, dynamic and beautiful work setting that will not only foster their ideas but also create invaluable business connections while still affordable. In the tech sector, companies used to lease old apartments in downtown Tel Aviv, or even parts of existing office spaces of legal firms in Ramat Hachayal. The notion of working out of the basement or the garage was not foreign to most entrepreneurs starting up and renting 50 square meters above a restaurant on Lillenblum or Hamasger st is still fairly common practice. Joining accelerators often requires shelling out some equity in return for a cool place to sit so there were not many alternatives to affordable spaces.
Israel has caught the eye of real estate players like Mindspace and WeWork, who are seizing the opportunity and taking over entire buildings at prime locations. Joining boutique solutions such as SOSA and WMN, it seems like there is a proliferation of co-working spaces, all in the race to create the best in class shared office experience in Israel.

Prime Real-Estate Play

Thinking about the very basic need for the entrepreneur, the co-working spaces are tackling the sheer necessity of a place to sit, and where should this place be. In a word, Location.

Mindspace for example, was the first classic real-estate shared office space that opened in Israel. It enjoys the ultimate prime location for their two buildings. With one at mid Rothschild Blvd and the other at the old building of Tel Aviv’s Stock Exchange, Mindspace is at the heart of everything that is happening in the startup and creator scene in Tel Aviv.

Other co-working spaces are located in suburban areas to support specific communities outside of Tel Aviv like SUBS in Bet Shemesh, MESH in Modiin or Capsula in Netanya.

Mentorship Counts

The young entrepreneur is constantly looking for mentors and people who can provide more value. Co-working spaces provide just that.

For example, SOSA TLV resides in downtown Tel Aviv and its model includes an incubation element, as companies stay for a dedicated period of time only. SOSA brings into the space lectures from industry experts on a regular basis in order to engage and provide ongoing content. The space also has visiting hours with investors, which is incredibly valuable for startups. Rami Bracha from Pitango, Tal Barnoach from Disruptive, Guy Gamzo and Yanki Margalit are only a few of SOSA’s in-house advisory.

Global Positioning

A defining characteristic of the Israeli startup ecosystem is that the local market is never the target market. Other key geographies are the game plan for most entrepreneurs from day one.

At some point, startup CEOs find themselves travelling back and forth, and having an office across the ocean starts making a lot of sense. The global positioning of WeWork (now a $10 Billion business with offices in 12 cities across the US including New York, San Francisco, Boston and Seattle, as well as additional offices in Israel, UK and Netherlands) is a definite plus.

Tenants are able to utilize the different offices worldwide and have the same rooftop to call their home. WeWork established two offices in Israel, with a third location expected to open towards the end of the year.

Synergy Sells

Startups that are scaling their operations are looking for cost saving measures, as well as synergies for their business. Companies providing CFO services, legal counsels, designers, copywriters, etc. set up shop in co-working spaces to try leverage the community for additional business development. This creates a dynamic where the community can self-support: many times, the startups right across the hall provides just the services you need. Sourcing potential business becomes as easy as booking a meeting room on the shared Google Calendars.

Happy Community

Co-working spaces go to great lengths to keep their community happy. There is something very special about Israelis and the fact that they want to hang out together all the time. You see this when you travel the world and Israelis always stick somehow together. Maybe the army has made us more willing to share confined space as we used to share food, showers and tents with one another. The sense of comradery escapes not another important element.

More often than not, the way to an entrepreneur’s heart is through his stomach. Kitchens are well equipped with Nespresso machines (also Elite coffee if we are on the subject of army service), fruit, popcorn and dog treats. Yes, many of the co-working spaces are a-man’s-best-friend friendly.

Almost every day there is something going on. At Mindspace there is Theme Lunch on a weekly basis, and happy hours every Thursday. SOSA created a coffee bar in the middle of the space. Community managers at WeWork take care of your every need. Generally co-working spaces are now competing on services beyond just physical premises.

Delicately Dedicated

WMN, a new co-working space located at the TLV port, is inviting only women entrepreneurs to join and have a dedicated space catering to their needs. SUBS, the new co-working space in Beit Shemesh, is targeting entrepreneurs outside of Tel Aviv. The two differentiate based on the community they are targeting.

This approach will probably only grow in the future as more dedicated spaces are created for sub groups, such as designers, architects, etc. This actually is the opposite of creating a single co-working space which can house many disciplines. It goes to show that sometimes there is merit in residing together with people who are more similar to you and have similar requirements.

Funding Helps

Not only Israeli startups scaling up choose to house their operations in a co-working space, but also investment houses and angel investors. For example, Mindspace is the home of many investment houses. TLV Partners, the new fund by Rona Segev and Eitan Bek is planning to sit at Mindspace, joining other investors such as YL Ventures, Upwest Labs, Eilon Tirosh and other individual investors.

At SOSA, some members are actually angel investors who host their visiting hours or startup meetings at SOSA. Pitango for example, with offices in Herzelia, holds a weekly meeting there because it is an opportunity for them to see companies and meet other investors.

It appears that investors value coming in close contact with the ecosystem on a daily basis. Entrepreneurs can probably complete a funding round with investors and never leave the building.

Larger companies like to partner with these co-working spaces to get a chance to mingle with the hot new entrepreneurs who may go on to create the next big success stories of Israel. Microsoft Ventures, IBM, SAP, Meitav Dash, LeumiTech and others have partnered with key co-working spaces as everyone wants to enjoy the deal flow and potential business.

As a trend in Israel, this would only grow bigger and better. In the shared economy boom we are living in, renting out a larger space than you actually require and subleasing to others is a co-working space in the making. The talk of the town is that everyone wants to do it, but effectively only a few have been executing successfully on a large scale vision. The commoditization of the startup real estate business is coming to a point it will be the standard for funded companies. We will all find ourselves sharing instead of moving out solo. There are many merits to the concept which have made it a worldwide success. It would be interesting however to learn how larger companies might adopt the concept as well, allowing it will leave room to develop a personalized brand identity within the common space. Will the same economies of scale prove worthy to organizations housing 30 or 50 people in a shared space or will it remain a solution for scaling up businesses?

 

This article originally appeared on TimesOfIsrael

After a Chinese sell-off, is Israel next?

Since 2011, nearly 80 Israeli companies have raised money from Chinese investors, 30 new Chinese investors have entered Israel, and 11 Israeli venture capital funds have raised Chinese capital. In light of Monday’s accelerated selloff in Chinese stocks, what impact will the faltering Chinese economy have on the Israeli tech industry?

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Date Your Way to A Successful Round

Since many first-time entrepreneurs might not have fundraising experience but have plenty of dating stories, we felt compelled to share the similarities between raising $2.25M in a week and dating.

Dating rule #1:  Put yourself out there

Once you’ve decided to raise money, the most important thing is to let the world know. Having sat behind excel spreadsheets for the preceding decade, putting ourselves out there was far from easy. For entrepreneurs graduating from competitive schools or leaving high paying jobs, it can feel unnatural to suddenly be the person asking for money. But unless you’ve received a large inheritance or left a career in sales, you – the entrepreneur – will be the one doing the chasing. And like in dating, that can be tough.

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The making of an Israeli entrepreneur

I’m often asked why I decided to move back to Israel from New York to found iAngels.

Growing up in a high tech home, and later marrying into one, I found myself surrounded by talented entrepreneurs – young and ambitious colleagues, peers, and friends who have gone out to change the world by creating a product that launches into international markets. The dynamic Israeli startup ecosystem, with over 1,000 new startups founded every year, has cultivated a generation of young men and women with technology innovation at heart, and a determination to succeed despite the hardship along the way. This is my generation.

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Fund Forward: 8 Exciting Trends in Crowdfunding That Are Coming Sooner Than You Think

With a compound annual growth rate of 88% since 2011, crowdfunding, particularly equity crowdfunding, is taking off. The decentralization of finance gives individuals more choice and control as to where they invest their money, and simultaneously offers startups access to new sources of capital.

So what does the future of crowdfunding hold for us?

 

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