Unpaid Investment Banking Internships

I get asked this often but have never taken the time to address it. Other variants of this question include an unpaid private equity internship (usually a search fund) or corporate finance internship.

Unless you are working for your father’s massive company, I think in 95% of cases, no.

It is not a good use of time and honestly better used on just about anything else, including being a teller, working at Starbucks or making a failed attempt to start your own business. Or go overseas for 4 months to learn another language – we recommend Chinese or French.

This isn’t volunteering – people need to get something out of the internship other than LinkedIn fodder, a reference and a talking point.

Brand Names are Better than No Name Investment Banks

Citi would rather take someone who worked at Deutsche Bank the previous summer over someone from Deloitte. Deutsche Bank would rather take someone from Suntrust the previous summer over someone from Deloitte.

However, almost anyone would rather take someone from the corporate finance division of General Electric or Deloitte, even in audit as opposed to their investment banking division, over someone from a random boutique that nobody has heard of. If it is known that the position is unpaid, it makes it even more suspect.

At some point, firms are not given credit anymore for offering real investment banking work because there is no certainty of quality control. I know that to get a job at Deloitte, a candidate has to pass a rigorous interview process and perform adequately in an office with some amount of meaningful work in order to get a return offer. For Ding Dong Capital Markets, I have no such certainty.

Some brands are strong enough where no one cares that the previous year’s experience was unrelated to investment banking. For example, if you worked at the Bank of Canada or McKinsey or Google, there would be no shortage of interviews.

Unpaid Internships Do Not Offer Authentic Investment Banking Experience

The reason why past investment banking experience is a plus for a full-time investment banking job is because we know that you know what the job entails and what we do. So, someone from GMP Securities is going to spread the same comparable company universe, compile a precedents transaction database and spend time downloading thousands of files in a data room. And even if their summer was completely trash, we know that they suffered through thousands of useless pitches and we sympathize.

Now someone at no-name investment bank (if it is even an investment bank) may have been grabbing coffee, looking at REMAX listings, doing random ad hoc work that can be loosely tied to what we do but not really, rewriting boilerplate S-1s. Ultimately, it is not good enough. Sure there may be some good experiences that are unpaid, but we would rather not take the risk. Also, any good investment banker that is looking to start their own shop will generally be able to source capital or partners that can afford to pay – because they know that they need good junior staff.

Unpaid Internships are Unpaid

Money is important. Lebron James was not wrong, but he was not being altruistic either for this week’s Tweet Armageddon.

Receiving no money versus $30 an hour from KPMG Consulting? Plus perks and networking as well as all the other fun things that come with a real corporate job?

When Should You Take an Unpaid Investment Banking Internship

Now, depending on what stage you are in your working life, this 95% conviction that we have can go from 90% to 105%. Obviously, an unpaid investment banking internship would fall behind any mid-market or boutique (and by no means do we mean an Elite Boutique like Guggenheim) banking offers.

The only time that I would be receptive to doing unpaid investment banking work is if you are fresh out of high school or in your 1^st year summer in university, where no good internships are available and you want some experience working in an office. This has nothing to do with learning about valuation, Microsoft Excel or managing a data room. This is just getting to know how to be professional in a work setting and refining interpersonal skills. If you get to spread comps and any best practices, this is a bonus, but expect to pick up more bad practices than good ones that have to be unlearned if no one in the office used to work at Goldman Sachs.

When you are in your second or third year, the traditional investment banking summer analyst period, it is a much better option to get a brand name on your resume, be it another professional services firm or a Fortune 500.

After graduation, you can consider bumming in some desk in an unpaid internship if you have absolutely nothing else to do – but be prepared to leave immediately the moment you get a paying job. Do not ever feel guilt tripped by some story of the firm spending a lot of resources on you and requiring a commitment. Just lie to them and kite the moment something better comes along. No hard feelings, and if they get upset they can pound sand.

Screen the unpaid internship before you consider it. If the founders topped out as manager at Grant Thornton or have just been peddling penny stocks their whole lives, I would pass. If the founder was a VP at Credit Suisse, I would be more inclined to go in for a coffee chat. This is no different from screening a company that you are going to invest in.

Don’t be willing to do real amounts of overtime at an unpaid internship either – and certainly do not let it interfere with your life (after all you do not have a real job) unless you genuinely think that you are learning tons and enjoy being there.