Can You Be a Good Investor If You’ve Never Been an Entrepreneur?

My first job out of college was in the field of engineering (Structural Engineering, to be precise). I wanted to build buildings and work on complex job sites where I would wear a hard hat and boss people around. For some strange reason I thought this was what engineers did……..right out of college. After college, when I sat down at my desk for the first time at my “real” job, no one was surprised that engineers don’t really do that, except for me. Over the next few months, reality began to sink in and I realized that even though engineering wasn’t exactly what I was hoping it would be, I needed to suck it up and do my job; and I did.

In my last year of college I became very interested in the stock market. I was fascinated by the idea that a person could purchase stock in nearly any company they wanted, do absolutely no work, and make money. I got so interested in money and finance that I wanted to change my major, but since I was in my very last year of school I figured it would have been foolish to do that. So instead, I figured I would teach myself everything there was to know about the stock market by reading as many books as I could on the subject. On a daily basis, after I finished my engineering homework, I plunged myself into book after book about stocks, mutual funds, options, finance, etc. I have no way of knowing this or not, but I think I read and studied so much about the market that I probably unofficially got a minor in finance.

After graduation, my attraction to the stock market grew even stronger and I realized that even though I didn’t like my engineering job, I was finally making good enough money that I could actually purchase my own stocks. I had a very simple investment strategy at the time – invest in companies that made products that I used in my everyday life. The first two stocks that I purchased were Sandisk and Apple. I chose Sandisk because I used USB drives all the time and I chose Apple because I had just bought my wife an iPod Nano and I thought it was really cool. Technology stocks were my favorite because for some reason I just seemed to really understand the market around them and at the time they moved really fast (up and down). I developed a simple buy-sell strategy that I followed religiously and over time I was consistently profitable.

Over the course of the next nine months I thought to myself that maybe I should try and do this full-time since I was pretty good at it, and quite frankly, I was sick and tired of being chained to my desk all day as an engineer. Don’t get me wrong, engineering is a great career, but the longer I did it the more I felt like I was missing out on doing my own thing and pursuing my passion of investing.

As I started contemplating making a career change out of engineering, I initially became discouraged because all of the cool investment banking and finance jobs I found required a degree in finance or accounting, both of which I did not have. During one of my job searches, I stumbled upon a couple of job postings for becoming a financial advisor. After researching what a financial advisor actually does, I thought to myself that surely this was something I could do. And the best part was I did not need a degree in finance to do it.

With my hope of working in the financial industry restored, I set my sights on getting a job with one of the big banks (Merrill, Morgan, UBS, etc.). I applied to these and several other places and the pushback I got from every one of them was they felt I didn’t have enough career experience or a broad enough financial background to be successful there right away. Still determined to get into the industry somehow, I reasoned that instead of going directly to work for an investment firm, I could learn the ropes of the industry by working for a company that did a little bit of investing and other financially related stuff. Broadening my job search allowed me to start seeing financial advisor positions that offered both the opportunity to do investments and insurance. I knew nothing about insurance, but I figured I could teach myself in the same way I taught myself about investments.

To my surprise, I was able to secure several interviews for these type of financial advisor roles. The only drawback of working in these types of positions was that they did not pay a salary like the big banks did. There was no pay; it was 100% commission. I had always had the desire to do something on my own and pave my own way, but working on 100% commission was something I wasn’t sure I was ready for. The only other entrepreneurial endeavor I was involved in at the time was selling tee-shirts on the internet from my house, and not even that was going well. At some point in the future I’ll probably write a blog post about all the mistakes I made when I started that business. Maybe I’ll title it “What Not to Do When Starting an E-Commerce Business.”

As time dredged on at my engineering job I grew more and more miserable. On a daily basis I would run different scenarios in my mind about taking a 100% commission job and abandoning my career as an engineer. There I was in a new city, hundreds of miles away from my hometown, with very few connections, and I was thinking about taking a job at a company where I be forced to create my own paycheck. There was no room for failure. Thinking back on it, the odds of my situation were not in my favor, but I believed that I could do it. I thought to myself that if I wanted to pursue a career in finance that I was going to have to take the risk and make it happen. In fact, I convinced myself that it was riskier to work for someone else because I did not have “control”- somebody else did. This bothered me immensely.

With my self-confidence running high, I walked into my supervisor’s office and gave my two weeks notice. When I told him about my true interests and what I was really passionate about, he graciously understood where I was coming from and gave me his blessing. He even told me that if I wanted to come back they would welcome me with open arms. I silently thought to myself that at least I had a backup plan if it didn’t work out, but I knew when I left there was no ever going “back.” I was through. In my mind, I didn’t need a backup plan because I was determined to succeed.

My first few weeks as a financial advisor actually didn’t involve doing anything with finance at all. Instead, I and the others in my recruitment class, spent all of our time in classes on how to run a successful business. We took classes on finance, accounting, managing customers, sales, marketing, setting goals, banking, and business structure. During this time I grew tremendously because not only was I able to work in the financial industry but I was learning how to run my own business as an entrepreneur.

Now that I was working on 100% commission and living in one of the most expensive cities in the country (Chicago) I knew that it was time to get to work. Every day for a year I would get into the office at 5:45am to plan my day and reconcile my activity from the previous day. In my business there were three primary roles – sales, marketing, and admin – and I was responsible for doing all three every day. After about three months I was starting to see results and I was very happy with how things were going. I set records in my firm for new clients, sales activity, and I even earned a place in management as a mentor to newcomers to the firm. After nine months on the job I had already earned twice as much as I was making as an engineer. I hired a full-time assistant and had moved into a corner office. Times were good.

In 2008 the market dropped dramatically, and in spite of my success, I was not immune from the turndown in the market and the shift in consumer sentiment about money. The effect of the change in the market didn’t hit my business immediately, but eventually it happened. People were cancelling meetings, investing less money, and cancelling their insurance policies. It sucked. All of sudden I went from being at the top of my game 18 months prior, to barely making ends meet. I had to let go of my assistant and downsize out of my corner office because I couldn’t afford the rent. I don’t know if you’ve ever had to let someone go, but I’m telling you that it is NOT easy. In fact, it’s one of the hardest things I’ve ever had to do in my life. When someone else’s livelihood depends on you paying them, and then you’re the one responsible for cutting that off, it can weigh on you mentally. But, unfortunately, it had to be done.

Eventually, in late 2009 the market started to turn around and my business started to pick up again. By this time in my life I had been working in the financial industry for nearly three years and I wanted to try applying to work for a big bank again. I eventually got a job at Morgan Stanley and at the same time went back to school to get my MBA. Two years later and after completing my MBA, I set my sights on getting a job in venture capital or private equity. I believe my interest in this space developed from my original interest in investing and finance, and my new found experience working as an entrepreneur.

I decided that if I wanted to work in venture capital I needed to leave Morgan Stanley and either work somewhere else that would bring me closer to the industry or go work somewhere where I could learn something new about finance. Therefore, over the next two years I worked in the banking industry and learned as much as I could about credit, interest rate risk, taxes, and much more. Probably one of the most interesting takeaways from working in the banking industry was seeing how businesses worked with banks in all manners of creative financing. It was truly incredible what some of these banks were doing. During my time in banking I continued to search for the right opportunity in the VC space, and I’m glad to say that years later, I eventually found it.

In getting back to the title of this blog post, without my prior experiences I do not think I (personally) would be able to confidently analyze investment opportunities or successfully work with entrepreneurs. I’m not saying that it’s absolutely necessary to have been an entrepreneur prior to being an investor (I’m not saying that at all). But what I am saying is, it certainly doesn’t hurt.

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