A Detailed Guide on Technology Investment Banking

The technology industry is evolving and dominating almost all sections of the economy. Technology domination aids in making processes faster and easier. Sectors, including investment banks, private equity, media companies, and telecom companies, have ventured into technology. 

These tech companies offer essential benefits, including better financial savings and increased productivity. Better customer experience and increased automation are some added benefits.

Additionally, technology companies provide software, hardware, and the internet for programming. Programming helps individual divisions, including the investment banking division, to handle their activities efficiently. 

Meaning of technology investment banking

Technology investment banking is an industry group using gadgets, including software, internet, and hardware, among others. They advise tech companies on private placement of capital, strategic transactions, and equity affluence, among others. Some of these investment banks have dedicated technology groups. Others put them in larger TMT (Technology, Media, and Telecom) groups.

Difference between TMT and Technology Investment Banking

You should know that technology investment banking deals mainly with financial services companies. TMT includes other companies such as media companies and telecom companies. 

Media and telecom are connected in TMT investment banking. Media companies are essential in producing the required content. Tech companies provide software, hardware, and equipment for content consumption. At the same time, tech companies deliver content to the targeted audience. 

In other years, increased Convergence between TMT companies has been noticed. Examples of this convergence are Disney and Netflix. Disney is now a broadcasting Powerhouse that started from cartoon making.  Netflix now creates original content but initially started as a tech company. 

Basis for Comparison TMTTechnology Investment Banking
CompanyMainly deals with media and telecommunications companiesMainly deals with financial service companies
Content ProducedInvolved in producing the content consumed by the audienceProvides the hardware, software, and tools for delivering the content to the audience 
Industry CoverageSupports development and research for both tech and telecom companiesAdvise clients on the best decision to take in the changing financial marketplace

Why technology investment banking?

Lucrative reasons are making venturing into technology investment banking beneficial. Reasons include the fact that big tech companies are dominating the market. Others include startups that never stop growing. Tech banks are dominant and lucrative—multiple deals ranging from private to billion-dollar M&A to IPO.

1. Big tech companies are conquering the market

Technology companies have shown dominance over the years in some places. This industry dominates both the US and global markets. The industry can create great profit for investment banks and investors. 

Eight out of the ten biggest multinational companies are technology oriented. Technology is also essential in raising debt capital markets for startups. Advanced technology is critical for maintaining a company’s position even after adversities.

2. Technology never grows out of fashion

Technology always has something new and exciting. The technology industry is highly competitive. This makes it necessary for companies to adjust and stay ahead of the game. Technology is among the sectors reported to have stood the test of time.

3. Technology helps run businesses smoothly

Technology is modernized to calculate data and predict profit and suggestions to businesses before time. This prediction will have tips to guide you on raising either equity or debt capital markets.

In tech investment banking, there are unique technology investment banking analysts. These analysts usually gather, analyze, and document businesses and system requirements. They also translate business requirements into technical requirements. Translation helps in knowing business needs and specifications to aid in business growth.

4. Technology is not quickly challenged

There was an event during the ’90s known as the dot-com bubble. The dot-com bubble describes an era where technology was replaced by energy. Technology became stronger in the mid-2010s. As of recently, 8 out of the ten largest companies are technology oriented. This gives an insight into the ability of technology to regain its place after adversity.

Ten largest technology companies by market capitalization

1980: Peak Oil1990: Japan Will Take Over The  World2000: TMT Bubble2010: China Will Take Over The World2020: U.S Will Take Over The World
IBMNTTMicrosoftExxon MobilApple Inc
AT&TBank of Tokyo MitsubishiGeneral ElectricPetrochinaMicrosoft
ExxonIndustrial Bank of JapanNTT DocomoApple IncAlphabet
Standard OilSumitomo Mitsui BankingCisco-SystemsBHP BillitonAmazon
SchlumbergerToyota MotorsWal-MartMicrosoftTesla
ShellFuji BankIntelICBCMeta Platform
MobilDai Ilchi Sangyo BankNTTPetrobrasTMSC
Atlantic RichfieldIBMExxon MobilChina Construction BlankTencent Holdings
General ElectricFuji BankLucent TechnologiesRoyal Dutch ShellNVIDIA

5.     Few barriers to entry and processes

Starting a tech company is not hard. You can easily use your garage or balcony to start your tech company. Jeff Bezos began from a garage and is making a fortune today. Biotech startups face restrictions from the government, FDA, and other regulators. This restriction makes it possible to have multiple technology startups and a few biotech startups. It also makes it possible for tech banks to have more deals.

In investment banking, striking a deal requires a small group of technology investment banking teams. This team consists of four to six bankers. The bankers might include an analyst, associate, vice president (VP)/director, and managing director.

Technology investment banking sub-sectors

There are multiple sectors within technology investment banking. Tech alone can be split into dozens of subsets. The most common and accessible subsets include:

1. Semiconductor

This technology industry requires an investment of large sums of money. This tech company is responsible for building the inside of equipment, including RAM. CPUs and graphics cards are also constructed quickly by this tech company. 

Semiconductor shares some similarities with Hardware and equipment, but Semiconductor is highly cyclical. TSMC (Taiwan Semiconductor Manufacturing Co.) is an example of a semiconductor Company. Supply shortages and news on new products can conveniently shoot up demands.

2. Software

Most software companies offer software as a service to interested candidates. You will pay as you use the software. The software subscription can be daily, weekly, monthly, or even annually. 

Software is categorized with matured companies such as Microsoft, Netflix, and others. Metrics like unearned revenue and lifetime value are made more common. Customer acquisition cost is also made more common.

3. IT services

There are two smaller subsets contained in this category. The first is data processing and outsourced services. The second is IT consulting services. Data processing and outsourced services deal with Visa, Western Union, MasterCard, and ADP. 

It is a consulting service that deals with IBM, Accenture, and others. Consumer spending for Visas and Mastercards is the critical driver for data processing and outsourced services. Outsourcing and business spending are the key drivers for IT consulting services.

4. Internet

There are multiple and unique services classified with the internet. These services include Social networking such as Instagram, Twitter, Facebook, and Telegram.

  •  People use social networking to share information and ideas and strengthen brand recognition. 
  • Social networking is also used in promoting products and services. It is also used in answering customer queries and concerns. 
  • The Internet also includes e-commerce services like Amazon, AliExpress, Alibaba, and lots more. E-commerce platforms enable brands to showcase a variety of products available. Prices and product details are also enquired about through e-commerce channels.
  • The Internet also contains search engines such as Google, Weibo, and others. You can use these search engines for both research and entertainment. Many companies usually focus on monthly active users and average revenue per user.
  • Others rely on advertising revenue and microtransaction, and user growth. Gross merchandise value (GMV) is crucial for marketplaces such as Amazon. 

5. Hardware and equipment

This company is similar to industrial companies. 

  • The operation of this company requires a large sum of money investment. Cash flows and gross margins are significant for this category of company. Examples of companies in this category include Samsung, Apple, Foxconn, Tesla, and Dell. 
  • Hardware and equipment companies are both consumer and business oriented. They provide end-user services to consumers such as HP, Apple, Samsung, Dell, and others. They also offer manufacturing services to other enterprises like Foxconn.
  • There are also exceptional cases like Tesla. Tesla is known to engage in many productions and manufacturing services. They build and sell cars and develop batteries and solar panels. 
  • They have self-driving car software pursued by Microsoft, Apple, etc. All these services make Tesla a Tech focused company rather than an established car company.

The 4-step process of getting into technology investment banking

Getting into technology investment banking cannot be easily bypassed. It’s a long and enduring process, from resume writing to interviews. Firstly, you will gain finance experience, write your resume well, and Pass screening and discussion. The steps are broken down below:

  1. Gaining finance-related experience 

For a finance graduate, a full-time job related to finance is essential. MBA students interested in finance should have a pre-MBA internship in finance. There are many other relevant internships to help you gain the required experience. Relevant internships to join include venture capital, private equity, and banking student societies.

  1. Designing an excellent investment banking resume

Designing a top-notch resume is crucial because this is where most candidates are eliminated. The bankers only scan through your resume to assess its quality. A good resume should show the following:

  1.  Academic excellence proof

Your academics should be in the targeted field. Targeted school is also an added advantage. You should have a good GPA and graduate with honors.

  1.  High interest in finance

Your resume should be able to show multiple finance internships you have to partake in. multiple earned finance certifications, and finance courses. Certificate of Participating in finance competition and traded stocks should also be available.

  1.  Possess the qualities required of an investment banker

It would help if you showed strong numerical and analytical ability in writing the resume. Outstanding leadership, teamwork, Interpersonal and communication skills are also necessary.

  1. Ability to pass through screening rounds

The ability of your resume to pass through screening rounds is essential. Try to have a good connection through social media and others. Knowing someone from the bank is also an added advantage. Use LinkedIn, email, and school databases to confirm the recruitment process.

These channels are also used for conducting informational interviews. Cold emailing and calling to ask for a job sometimes work. But using cold calling and emailing should be your last resort.

  1. Completing the interview process

There should be two rounds of successful interviews necessary to get an offer. The first is called HireVue, while the second is called Superday. 

HireVue

  • The HireVue session is for asking you fit questions. Questions usually asked include why choosing tech banks, your strength, weakness, etc.

Superday

  • The Superday is where mental stamina and technical abilities are tested to the highest level. In this interview, candidates usually work the whole day as bankers. Candidates will encounter a pyramid of questions hanging on their divisions. 
  • Multiple interviews can be experienced on Superday interviews. The interviews can be as high as ten interviews per day or more. Congratulations were in order when you passed all interviews well.

3 Frequently asked questions

1.  Do tech banks give hints of interview numbers on Superday?

No, they do not expose numbers or questions to be asked in all interviews. Checking and reversing common interview questions would help if you got ready.

2. Will the ability of technology to run businesses faster replace humans?

Yes, technology might replace humans. This is because technology can perform many tasks more efficiently and accurately than humans. Additionally, technology can better assess and program bulk data faster than humans.

On the contrary, technology might not replace humans because it lacks the artistry to cater to the needs of humans. It’s a two-way part answer, a yes, and a no.

3. Can you get into tech banking without a finance undergraduate?

It’s possible because technology investment banking has many divisions and branches. But, you must have undergone a course related to finance. Such methods include pre-MBA finance courses, venture capital, and others.

Conclusion

Technology evolution gives rise to tech investment banks. These tech banks offer advice to investors, equity affluence, and others. Some banks have dedicated technology groups separate. Other banks placed them in other groups, such as TMT.  

Tech banks have many essential benefits to offer.  Such benefits include fewer barriers and entry processes, among others. Software, internet, hardware, and equipment, are some subsectors of tech banks. Software, internet, hardware, and equipment, are some subsectors of tech banks.

Finally, to build a successful career in tech investment banks, the first step is getting finance-related experience, followed by designing an outstanding CV. The next step is passing all screenings excellently and completing your interviews successfully. 

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