Your brain buzzes trying to make sense of everything and to put it all together perfectly. At this point, you can’t rely solely on the numbers in front of you. There’s more to it than that. You have to know how to read your hand, all aspects of it, and then make that split-second decision.
So, what is it that do you do for a living? Are you a professional poker player? A high-profile bodyguard? Maybe you’re some sort of spy.
Nope. You aren’t any of those things. You’re an analyst with a venture bank.
Not what you were expecting? Check it out. We had a chance to talk with venture bank analyst Porter McKay of Square 1 about what a venture bank is, what to expect when entering this field, and why you don’t necessarily need to major in finance to work for a bank.
What is Square 1?
Square 1 is a full-service venture bank that offers its services to experienced entrepreneurs and the venture capital community. Most of the clients are young, innovative companies looking for capital, often as a supplement to equity investment to fund their growth.
What Square 1 aims to do is provide capital (AKA give money) to accelerate growth and help companies reach personal goals.
How does a venture bank differ from a traditional bank?
Unlike a traditional bank, Square 1 isn’t necessarily looking for established and historical cash flows and income generation to support a loan. Instead, they evaluate the potential that a company has—what is the experience of its management team? Will the company succeed in generating future cash flows or attracting additional investment? And what will be the key metrics and milestones along the way?
In other words, Square 1 and other venture banks are interested in looking at the potential a company has—all of the factors that go into the company’s growth, their chances of success, and alternate repayment sources down the road.
What does an “analyst” actually do?
This type of banking requires a very high-touch approach to working with clients—building relationships and monitoring performance extremely closely. It’s all about the ability to read your hand and identify when something seems to be going awry or trending in a negative direction.
Because of that, even though numbers definitely play a part, it’s not the most heavily quantitative area of finance. Communication skills are just as important.
When Porter started with Square 1, he was in the analyst program. Though he did spend a lot of time in Excel, he also put together presentations and did qualitative analysis of companies and market opportunities.
Because the companies that Square 1 works with are often in their early stages and probably aren’t operating profitably, the first couple weeks of the analyst program are spent getting exposure to company evaluations and capitalization history—how they got where they are now.
There is a lot of focus placed on being able to evaluate a company’s performance based on their financial statements. During his time in the program, Porter saw a lot of balance sheets, income statements, and cash flow statements.
It was important for him to be able to identify milestones that companies needed to achieve in relation to their investors or equity investors as well as what the biggest risk to the company was in terms of their ability to repay their debt.
What is it like working for Square 1 specifically?
The high-touch nature of the work is actually Porter’s favorite part about his job. He interacts with clients on a regular basis and enjoys being able to talk with CEOs and CFOs of really well-known, prominent start-up companies that are growing rapidly. It gives him a lot of insight into how they’re running their businesses and how he can help those business leaders and others reach their goals.
At the same time, this also presents a challenge. These are entrepreneurs and there will inevitably be bumps along the road to success. It can be difficult to be able to identify the right opportunities and differentiate value propositions to entrepreneurs.
Not to mention how quick the process is. It’s a fast-paced industry and you’re often evaluating companies over the course of three months (rather than years) and sometimes you have to make big decisions or big asset purchases in the moment, not sometime in the future. You have to be able to digest a large amount of information and make quick decisions.
Which majors are the best matches for a career in venture banking?
You don’t necessarily have to have majored in something finance-related while in college. In fact, Porter was a Psychology major.
When applying to the position, Porter was preparing to take the CFA Level 1 exam, though he doesn’t believe this is a requirement for getting a job in the venture banking industry. That said, some level of exposure to finance and accounting is very useful, as is the ability to communicate in a thoughtful manner, and ultimately these skills will set you apart in the application process.
Porter started out as an Economics major, but after taking an environmental psychology class he became very interested in humans’ interactions with their environment, and how technology was going to change the way we interact with the world around us.
He ended up switching his major to Psychology and it seems to have served him well in his relationships with the clients at Square 1. His ability to write and communicate helps him to build relationships that are essential to his job.
As an analyst, you have to prioritize and know how to balance everything. As with most jobs, there are going to be times when it’s really quiet and other times when it seems like everything is happening at once. It’s important to be able to figure out what is most important that day, make decisions, focus, and maybe work longer hours when necessary.
Homework time! Porter explains that though this is a part of the financial industry, there are other skills (like communication) that are just as useful. Don’t be afraid to apply to a job at a venture bank just because you are majoring in something like Psychology. If you can, get some exposure to finance and accounting by taking a couple courses or a class outside of college—but remember that you have skills that venture banks are looking for.
Want to know a little more about Square 1 and what it’s like working in their analyst program? Check out their job description here.