professional trader: longevity@@ #start-up #Kun.h

Look at some young trader like Zhen Fang of Macq, or the Newport “neighbor” 顾小姐. I used to believe they have good career longevity. I knew these traders probably would NOT be full-time trading into their 40’s, because trading seems to be a young men’s game. I thought they could start their own prop trading business, with family money or raised fund. Now I feel it’s not easy at all

Q: At what age can they start on their own? Typically in their 30’s or 40’s. I interviewed with a Singapore trader who started his own FX trading firm. I think he was in his 40’s or 50’s.

Q: how much savings can they amass by that age? I think their income is not much higher than coders, so possibly 0.5 ->1-2 million. However, they also need to buy a home and raise kids.

Q: how much personal money can they use as risk capital? I feel up to a million. Neck was run by two former CIMB stock traders but had only SGD 3M in total capital.

Suppose they can achieve 10% return, the 300k gross profit must go to payroll, rent, market data, technology. If they have any outside money (say, from an uncle), they must distribute a decent return (like 6%) to compensate for the risk assumed by the uncle.

— hot money: most investors i.e. clients, including me, want the freedom to leave. Huge instability for the prop firm.
— competition: clients can choose from many different prop shops. Open competition.
— stress: full time trading for a big bank or hedge fund is stressful, but doing it for your own company is worse.
— Is this blogpost oth_risk? Yes releative to the other blogposts under t_semiHighFlyer.

startup riches: statistically rare #600w

In wake up1day..left behind the pack, one of the longest-running envies and FOLB pains is about tech start-up. Zhu Jiang (ZJ) is the poster boy story but a completely imaginary legend, without evidence. In my mind, the numbers are quite exaggerated:

• start up is valued[1] around $1b (an easy number for this blogpost) 100m to a few billions
• ZJ would be one of the top 20 [6] key employees and would receive some 2m of real cash[3], not stocks
• the company grows for a few years and is acquired or otherwise dies a glorious death[8]. Then ZJ would go on to another[9] start-up.

Now I question every part of this glorified fantasy.

Even if your startup employer (eg Mdaq) emerges out of a thousand others, you the employee is unlikely to become real-money millionaire from stocks. I think YiGe gave me some figures like $200k cash-out. In comparison, the salary over 3Y is probably a bigger sum.

Most tech start-ups don’t make you rich. I can see the reality in SG. As to U.S. I have reason to believe not so different.

— [1] valuation — A unicorn start-up is as rare as as a lottery winner.
U.S. is only slightly better than SG.

I tried Catcha and Zed but didn’t become a key employee.

Catcha was approved for IPO and probably a unicorn, but look at its current status.

Zed had big valuations (18B according to MS) partly acquired by Yahoo. Zed was high-profile but later acquired by low-profile buyers, so why is a tech start-up any sexier than those unglamorous, unspectacular buyers?

I tried Vibrasoft, EmpWorld, Dom1 as a key employee. There are millions of vibrasofts for one unicorn. How about Vultr, dreamhost and the younger BlueHost? All tech startups.
— [3] company cash flow #cf hedge funds
A unicorn probably has total funding around 100m to burn. If you want to cash out 2m, you are drawing blood from a struggling patient fighting for her life !

Remember most startups are extremely vulnerable, facing constant threats of extinction, without an established stronghold in the market like a hedge fund has.  Even a small hedge fund would make money from first year 🙂

So if you get $2m, it’s probably all-stock-no-cash. The cash-out would be pushed out by years, until an acquisition or IPO.

— [6] key employee
Mdaq may become a unicorn but how likely is a top 20 key employee to receive $2m stocks? You have to join early and be very very lucky.

How likely can you become a top 20 key employee in a successful start-up of a unicorn caliber, if you are not capable in other jobs?

Note there are key employees in marketing, sales, product visionary, CFO, so you may need to be more than the lead architect to qualify.

Note if everyone takes 2m cash, then we are talking about 40m cash allocation from a pool of 100m. Investors would kill you.

I think when a start up hits IPO or acquired, the founders have probably (5->20m-100m) paper wealth. Since you are not a founder, 2m paper wealth is rather high.

— [8] failure rate among successful startups
Many thriving tech start-ups fail eventually. I feel that’s the nature of the tech business — high churn. The cumulative profit is probably a small fraction of the peak valuation. Perhaps a few millions.

If you are able to cash out $2m before the down turn, then you are lucky.

Zeng Sheng felt decline (in valuation or popularity) is very common, even among the successful startup’s

Among the unicorns, a small minority get acquired as unicorns. The majority must survive through tech churn, make a living and prove their business model.

— [9] another start-up ?
It’s never guaranteed. ZJ is in the networking domain, displaced out of the limelight by block chain, crypto-currency, AI/ML, cloud.

Your age is a growing concern by the time you try another start-up. This is a ageism bias.

U.S.startups: often less selective,lower caliber

U.S. startups may represent a sweet spot among my job choices. I think they are less selective than HFT or top tech shops. They attract fewer top geeks.

• Workload – presumably comparable to ibanks like MS/Baml/Barc. I guess some startups are higher, but I guess fewer than 50%. Mithun described 3 startups but he has no firsthand experience.
• Salary — Many startups pay on-par with ibanks, according to CYW
• Leaves – possibly fewer than ibanks
• Cowoker benchmark – possibly lower caliber
  • Respect – could be slightly better than in an ibank if you earn the respect

Some of the big tech shops are actually less selective than HFT – Amazon, Apple

4 competing domains to Support dev salary@WSt

In terms of supply/demand, there are systemic forces that support the relatively high developer salary in investment banks.

• #1 pure tech shops — generate high profit, attract hot investment
• #2 buy-side shops including mutual funds
• #3 small startups — only in U.S. can they offer competitive salary
• #4 exchanges and fintech shops including bbg, Reuters, S&P. Some (Miami, NYSE..) seem to generate high profits
• #5 package software vendors

Few of these categories exist in Singapore.

##150k@light GTD-load: which FTE

Real deciding factor is coworker benchmark (not PIP/stigma). Are there managers tolerant of team members below the benchmark? Josh, Srini of Citi-muni..? Even in a less demanding company, pressure can be high.

• — Here are some jobs paying 150k with light GTD-load. Usually don’t attract young bright guys.
• employer:  slower ibanks like Citi, UBS
• employer:  some commercial banks like OC, BONY
• employer:  large traditional buy-side like AIG, Vanguard
• employer:  3rd type financial firms like exchanges/ECNs, data vendors (Reuters?), financial product vendors,
• employer:  non-finance like telcos
• employer:  startups but they tend to use new technologies
• less glamorous — like mkt data, back office
• greenfield codebase with short history —  like OC, StirtRisk
• smaller codebase — like RTS
• older workforce — like RTS
• older technologies — like SQL, C, socket