Investment Banking: What It Is And What To Know

investment banking guide bankers

You've likely heard of investment banking before, but do you know what it entails? On what occasion would you have to deal with an investment banker? How do investment bankers help you with your investing goals? 

An investment banker is a mediator between an investor and the entity they wish to invest in. These entities can include companies, governments, organizations, the stock market, and much more. 

They can help investors in making decisions, managing their finances, and securing deals. 

Here's what you should know about all that investment banking entails: 

Building Capital 

Have you ever worried about finding a high yield investment? That's where investment banking comes in. All professional investors and average citizens are looking to increase their capital. 

An investment banker can help you make wiser decisions for making investments. They can help you find the best places to make your investments. They can compare interest rates between bank accounts. They can give you details of the best Certificate of Deposit options. They will always be on the lookout for how to get the best return-on-investment. 


If a corporation needs capital it can depend on an investment banker for underwriting. Underwriting is the process of raising capital by offering opportunities for investing in stocks. 

Stocks are some of the best investments to increase your capital. This is an efficient way for an entity to raise funds for any project or initiative. The investment banker will set up an Initial Public Offering (IPO) for the entity to sell its shares or bonds to investors. 

With the IPO, the entity will sell shares/bonds to raise capital for the business. This can occur at the initial stages of a company's launch or during a time of financial crisis. 

In a Firm Commitment scenario, the underwriter assumes full financial responsibility. This means they must pay for any shares that are unsold. In Best Efforts, the underwriter isn't responsible for any shares that are unsold. They can return unsold shares to the issuer. With an All-or-None scenario, all shares must get sold or the deal gets canceled. 

If you run a business and need to raise capital, you might want to hire an investment banker for underwriting. 

M & A Advising 

Investment bankers can also help with Mergers and Acquisitions (M & A). This process will include helping one entity find another entity to merge with. 

The bank handles the negotiation on their client's behalf. If you have considered a merger or acquisition, you want to know if you are making the right decision. You want to know if you can expect a great ROI with either option. The investment banker will handle the research for you and the negotiations. 

Who Needs Investment Banking? 

Let's look deeper into which entities need investment banking and how they benefit from it. 

Investment banking gets favored by Companies (small and large) as a means to raise capital. The investment banker helps companies make better financial decisions. These include decisions for raising capital and investing their funds. They will also help with business growth and giving financial advice. 

Governments use investment banking for a number of purposes. These include trading securities, raising funds, and selling/buying crown corporations. Crown corporations are companies that get owned by the state. 

Institutional Investors manage other people's money and rely on investment banking for their goals. Investment banks help these investors with trading securities and researching investments. 

If you are in charge of a company, a governing body, or an institution you might wish to consult an investment banker. They are experts in understanding how to best capitalize on an investment. 

Skills to Become an Investment Banker 

If you wish to embark upon a career in investment banking, here are some of the skills you should master: 

You have to know how to negotiate for business purposes. You will have to know how to find the best deals to find a win-win situation for all parties. They can help find the best bargaining option for both a merger and an acquisition. 

An investment banker also has to understand how to evaluate a business. You want to know how to analyze a company's financial health. Do you understand the financial trends within a business? How do you assess the data and make decisions based on such information? These are all some of the skills you'll need to advise different entities. 

You also have to know how to develop a relationship with your clients. You should also master how to create spreadsheets and create financial reports. 

Becoming an Investment Banker 

So how do you start on your career to become an investment banker? 

The first step is to make sure that you master your mathematics skills. You have to be able to handle mathematical problems with ease. You should know about bookkeeping, balance sheets, and financial reporting. Many investment bankers will have degrees in finance or mathematics. 

If you want to stand out amongst your competition, you can consider getting an MBA degree. It's always wise to take classes on investing so that you can keep up to date with different trends in investment banking. 

The second step is to find your first job in an investment banking firm. An entry-level position might be a Junior Analyst. This job will require you to study a company's financial health. Afterward, you then assist the Senior Analyst to make decisions on the client's behalf. 

If you work well in your position, you will work your way upward in the industry. You should also try to shadow the different positions within the company. This will help you determine which investing tasks you are best suited for. 

Get Started With Investment Banking 

Now you know what investment banking entails. You can figure out how investment banking can help you or your organization. 

If you want to start a career as an investment banker, use this guide as a starting point. Make sure you understand the different tasks to see which ones can serve your investment banking needs. 

Please share this guide with anyone else interested in investment banking. You can read more great financial content for investment bankers on our website.

Official Bootstrap Business Blog Newest Posts From Mike Schiemer Partners And News Outlets