The world of high finance is so mysterious. Shows like HBO’s Billions and movies like Wolf of Wall Street, Margin Call, and The Big Short have given us a glimpse of what Wall Street looks like. However, a bit more understanding of the various organizations involved is needed, especially by students just starting out. In this article, we’ll preview the key types of firms that are involved in the world of big finance. But first, let’s see how an expert college paper writing service can help you get your foot through the door and make you stand out as a college student looking to go into corporate finance.
Understanding the Different Types of Firms Before a Career Move
Corporate finance is a wide world. There are accountants, bankers, economists, fund managers…you name it. For students aiming for a career here, two things are a great help: a good and aligned college degree and some nice writing skills for your application essays, personal statements, LinkedIn profile, etc.
With a professional writing service, you’ll have a good shot at making your application to various colleges stand out. You can also get all the help you need with tough assignments and academic research during your college phase.
Now, let’s get you a bit more curious about the world of corporate finance with these seven types of firms.
1. Venture Capital (VC) Firms
VC firms are the lifeblood of innovation, and they’ve been a big part of the tech explosion of the last two decades in Silicon Valley. VCs provide crucial, early-stage funding to startups with high growth potential but would otherwise be shunned by traditional lenders such as commercial banks. Virtually all Silicon Valley companies, such as Meta, NVidia, and other tech giants, have gone through VC rounds.
Besides funding, VCs will also provide expertise and valuable network connections to their investees. That’s great news for startups that are navigating the turbulent early growth stage. VCs make their money back through exit strategies like IPOs, mergers or acquisitions, buyback of shares, or even liquidation.
2. Hedge Funds
Hedge funds are known for their high-stake strategies and elite clientele, often shrouded in mystery regarding their trading strategies. Some famous hedge fund managers in real life include “corporate raider” Carl Icahn, Ken Griffin, Ray Dalio, and the genius Jim Simmons, who kind of looks like The Architect in the Matrix movies.
So, what does a hedge fund do? It essentially pools capital from various investors to trade in different asset classes – currencies, stocks, bonds, housing markets, commodities like precious metals…anything that can turn a profit. Their goal is to generate a high return, regardless of market conditions. This is done through various complex strategies such as long/shorting positions, arbitrage, and derivatives.
3. Angel Investors
Angel investors may not be quite as popular as the other items on this listicle. However, they play a critical role in the startup ecosystem – usually the first line of financial backing for fledgling startups and companies with great pitches. Thus, angel investors are usually the first to identify great opportunities and potential in products, ideas, or startups. Shark Tank, anyone?
Angel investors often invest smaller amounts, often due to the fact that they are mostly individuals investing their own money. However, they benefit by investing even in ideas that don’t have a solid revenue strategy or growth plan.
4. Investment Banks
Investment banks are the titans of corporate finance, offering a suite of services to corporations, governments, and institutions. Typically, they are involved in mergers and acquisitions, underwriting securities, financial advisory services, and trading on behalf of clients.
For example, investment banks can underwrite government transactions in infrastructure where public-private partnerships (PPPs) are involved. Some of the biggest investment banks include JP Morgan Chase, Credit Suisse, and Deutsche Bank.
5. Private Equity Firms
Private equity (PE) firms are often misconstrued as VC firms. However, private equity firms focus on acquiring companies either wholly or in part, improving their operations, and selling them for a profit. Usually, the firms they acquire are not publicly listed, giving PEs much leverage to make substantial changes without too much public scrutiny.
PEs may either pool capital from institutional or individual investors, often with a minimum entry cap of $250,000. However, unlike VCs and angel investors, private equity firms often lack the emotional attachment to their investees and will usually only go for companies that are already well established and are in the profit range.
6. Mutual Funds
Fun fact – did you know that BlackRock Inc. is the world’s largest company by capitalization, with over $10 Trillion of assets under management? That’s bigger than the value of Apple, Meta, and Tesla combined. BlackRock is a proper example of a mutual fund – a company that manages a portfolio of stocks, bonds, and other assets or investment classes.
Mutual funds will pool together these different securities and spread out the risk over a fixed or flexible timeline, making them attractive to individual or institutional investors.
7. Commercial Banks
Commercial banks are the backbone of the financial system and the most visible edge of the financial world. They are essential to businesses, individuals, and even governments, as they provide services like deposits and withdrawals, credit, and checking account services.
Commercial banks facilitate everyday transactions and are much more linked to the economy than the other items on this listicle.
Choosing the Right Degree for Your Finance Career
Often, the type of degree you pursue will significantly influence your entry into these various institutions in finance.
You can consider the following:
- Finance: A degree in finance is versatile and will often cover a range of topics, including investment analysis, financial management, risk management/assessment, and corporate finance.
- Economics: This degree focuses on the broader economic forces that shape markets and business decisions. Students with such a background will be suited for investment banking, consulting, governance, and other research positions requiring sharp quantitative and analytical skills.
- Accounting: This major is usually combined with finance to lay a solid foundation for financial reporting, tax planning and auditing, and management accounting.
- Business Administration (MBA): This is a great choice for those aiming at leadership and managerial roles, with a specialty in advanced corporate finance, investment management, and strategic decision-making knowledge.
- Mathematics and Statistics: Have you ever heard of Quants on Wall Street? These whizzes are often found in hedge funds, mutual funds, and VCs, where high-level quantitative analysis is essential. Quants produce accurate models and algorithms that drive trading strategies and risk management processes.
Final Thoughts
With this knowledge, you are now able to make a suitable assessment about whether you’re cut out for the world of high finance. Understanding the roles played by these different institutions will allow you to choose your niche early and settle for the right decision.
Besides that, we’ve provided an overview of the type of educational background that you might require to make the cut. Identifying the right institution and choosing the right educational path will set you on the course to future success as a corporate financier. Best of luck!