It’s an investment banker’s job to raise money for the bank’s clients

Working up to 120 hours a week, investment bankers help major corporations navigate IPOs, mergers, and more. Despite long hours and a high-pressure environment, investment banking remains a critical industry that shapes the global financial landscape.

At some point in their careers, many investment bankers work on facilitating or advising clients on mergers or acquisitions. From analyzing industry group trends to deal negotiations, an M&A in investment banking explainer outlines how investment bankers handle these business transactions.

When a company undertakes an IPO, investment banks often buy many of the organization’s shares directly from the company, in order to sell the shares on the stock market. The bank stands to profit after marking up the shares.

Investment bankers organize large financial transactions at a high level. But what does that look like day to day? A video breaks down the specifics about the transactions and deals investment bankers work on, and which members of an investment banking team have eyes on each project.

Back in 2012, a University of Southern California researcher published a decade-long study in which she observed investment bankers’ health. The results weren’t exactly stellar. Every individual the researcher observed developed a stress-related physical or emotional ailment within several years of working in investment banking.

Although some banks report attempts to cap hours for junior employees at 80 hours per week, these employees often continue working many more hours than that. Goldman Sachs analysts, for instance, went viral back in 2021 when they put together a PowerPoint deck complaining of 100-hour work weeks and mental health struggles.

These tables provide a visual to help keep track of the leading companies in investment banking. Companies such as JPMorgan and Goldman Sachs typically sit up top.

These bonds offer investors regular interest payments in addition to the return of the principal amount at maturity. They allow companies to raise capital without losing ownership.

Startups raise money in different rounds from investors that include their friends and family, angels, and venture capital funds. These types of investors serve different purposes.

Although the process of going public means the general public can invest in a company, the initial investment period is different. Before individual investors get in on the action, investment bankers sell the shares to larger financial institutions who can afford the asking price and risk associated with an IPO.

Institutional investors, on the other hand, are investing for someone else. There are big differences between the two, one being that institutional investors can be granted certain special treatment (like being able to purchase IPOs right away).

During the book-building process, bankers determine an IPO’s price per share, requesting bids from fund managers and other institutional investors for the number of shares they want and how much they’d be willing to pay for them.

To do big things, people often need more money. Banks jumpstart economic activity with loans paid back with interest, and when things are working well, both people and the bank make more money. Formed in the Middle Ages amid competing currencies in Italy, banks—from the Italian for bench, banco—helped stimulate that era's commercial revolution, a massive expansion in Mediterranean trade and development. Find out the ins and outs of banks in this quick explainer video.

When a company decides to approach IPO, it typically hires investment bankers—who earn about 7% of the IPO’s gross proceeds—to help set the organization’s target valuation range and schedule an IPO date. But that isn't the only fee associated with the IPO process.

Bonds are fixed-income investments allowing individuals to lend a specific amount of money to a large entity, like a government or corporation, for a set amount of time in return for interest paid out over the life of the loan. The bond market is widely considered a key economic barometer.

Venture capital firms get the money they use to invest in companies from limited partners, also called LPs. It’s the general partner’s job to manage that money and invest it in the right startups.

When startups take on outside funding, those investments are divided into different "rounds." These rounds are catered to different stages in a startup's life cycle—a startup often needs different types of investors and amounts of funding at different stages of the business. For instance, a pre-seed investment round can include investments ranging from about $25K to $500K, whereas a Series D investment can be hundreds of millions of dollars.

This means the interest you earn on your deposits is lower than what the bank earns on the same amount. Banks often keep cash reserves (though a minimum requirement was rescinded in 2020) but generally invest in government bonds, corporate securities, and loans to other banks. During bank runs, depositors withdraw more than the bank has on hand.

In the large-scale projects real estate investment firms handle (such as huge commercial developments), the parties involved in a sale are more likely to be large corporate real estate developers and investors than individuals.

Mutual funds function similarly to other types of investments. If you want to invest, you go through a brokerage firm. However, they have a few key differentiators. Most are actively managed by a broker instead of passively earning you returns. Plus, they can carry some hefty fees.

In a leveraged buyout or "LBO," private equity funds finance acquisitions with debt secured by the target company's assets and cash flows. The PE firm aims to improve operations and leverage the company's profile to pay down debt, thereby increasing equity value.

Retail investors often trade 100 shares at a time, while institutional investors trade 10,000 or more. The biggest difference is that, unlike retail investors, institutional investors are professionals who are trading someone else’s money.

When a homebuyer finances with a lender, they aren’t necessarily the one footing the bill. After a buyer secures a home loan, the lender can sell the loan to another financial institution or a private institution. That group can later sell that mortgage to investors. This is called securitization.

According to a Barron’s article, only about 1.3% of the $69T asset management business is managed by firms led by women or minorities—even if their performance is comparable to those led by white men.

Margin accounts are leveraged accounts through brokerage firms that allow investors to make trades without the full amount of capital on hand. Similar to a secured loan, margin accounts often require some form of collateral and typically have a cap on how much investors can borrow. However, trading with a margin account is much riskier than a traditional investment account. Fees and charged interest are due on margin accounts, regardless of trade performance, meaning it's possible for investors to lose more money than just their initial investment.

The accreditation is meant to protect retail investors from potential losses. Financial professionals with Series 7, 65, or 82 licenses qualify, but so do individuals with over $1M in net worth.

Star bankers are the core of an investment banking firm's business, so when Perella Weinberg let their restructuring guru Mike Kramer go in 2015, he sued, launching a ten-year legal fight.

Angel investors leverage their high net worths to fund seed-stage startups. While they could see high returns, investing in such an early company is a risk.

Each type has variations of its bond offerings with different interest rates, loan lengths, maturity dates, and terms. Each type also carries its own risks and rewards.

The first so-called angel investors funded theatrical productions. Now, angels invest in startups at an early stage, hoping their investment will pay off in the future.

Early-stage startups often try to secure seed funding from investors in order to take their idea from concept to reality.

Nearly all of its 26,000 employees immediately lost their jobs. But in London, a few hundred remained tucked away, working for another decade to wind down the bank’s European business.

Invest in the boind market through a brokerage, mutual fund or ETF, or the US government. Each has different steps and terms to follow, from starting rates to opening specific accounts. Some bonds are relatively easy to purchase, but the process differs depending on the type of bond you want.

In 1933, the Glass-Steagall Act legally separated commercial banks in the US from investment banks. However, by 1999, the act was repealed—meaning that today’s investment banks are no longer required to be separate from the type of bank where you deposit your paycheck.

A "long" position gains from an increase in a security's price, whereas a "short" position profits from a price drop. This article includes a detailed explanation of the term "position" as it relates to investing and financial markets.

The traditional view of banking is that customers deposit money into the bank and the bank lends out those deposits. That's partly true, but most banks work by making loans first, which creates an asset on their balance sheet as a corresponding deposit. Banks often operate under a money multiplier ratio, lending out several times their total reserves.

To diversify their portfolios and mitigate their risk, angels may invest in startups that are at earlier or later stages of development, as well as in various industries.

Consulting firms also often keep their clients private to maximize the sectors they’re able to secure contracts for and avoid any perceived conflicts of interest.

Like private equity fund managers, private credit managers typically raise funds directly from investors, lending to corporations. The borrowers can benefit from the lack of middlemen and resulting efficiency, and the lenders often yield comparatively higher returns.

A video explains how private companies have taken advantage of this loophole, why investing in these companies isn’t always a good idea, and how blank-check companies (as they’re commonly called) work.

More than 30% of venture capital deals come from leads courtesy of a VC’s former colleagues or professional network. You can learn more about how venture capitalists decide which companies to invest in by reading this article.