Why Silicon Valley has a big crush on Wall Street4 min read . Updated: 25 Mar 2015, 11:24 AM IST
Boards of tech companies are stocked with former Wall Street elders who can help them develop strategy and forge important business connections
Some Wall Street stars are decamping for Silicon Valley, corralled by tech giants and tech start-ups looking for financial expertise, marquee talent and bragging rights.
Morgan Stanley announced Tuesday that Ruth Porat, its chief financial officer and a 28-year veteran of the firm, will become the CFO of Google at the end of April. (She replaces CFO Patrick Pichette, who quit this month before his successor had been chosen.)
Porat is a big get for Google, which has had issues with analysts and regulators over slowing growth and concerns that it bullies competitors on the Web. Porat has a sterling reputation on Wall Street and in Washington, where’s she’s regarded as an executive who has a deft hand with regulators and investors.
During the financial crisis that began in 2008, Porat advised the treasury department on the bailout of the foundering government-sponsored lenders Fannie Mae and Freddie Mac. She helped rebuild Morgan Stanley’s reputation with investors in the wake of the crisis. Her performance through all of that got her on the shortlist of candidates to be the US deputy treasury secretary.
Google’s desire to have someone like Porat in its C-suite speaks to Silicon Valley’s continuing effort to buy managerial legitimacy and gravitas, a need heightened by the fact that companies like Google—which were still relatively new 15 years ago—are now elder statespeople that have to pursue much more sophisticated dealings with big investors and public policy makers.
Porat is hardly the only executive changing hats.
Anthony Noto left an investment banking job at Goldman Sachs for the CFO spot at Twitter last summer, after Twitter had suffered through a series of Wall Street disses about its slow user growth and lackluster business model. Noto has been so popular that some investors and analysts have speculated he could be Twitter’s next chief executive.
Other companies—especially high-flying, high-risk private companies—have recruited Wall Street stars who can bring, at the very least, a sense of permanence and adult supervision. Some of the executives who’ve swapped pinstripes for hoodies are former Goldman Sachs tech banker Sarah Friar, ex-Credit Suisse dealmaker Imran Khan, JPMorgan’s former commodities unit head Blythe Masters, and former Morgan Stanley analyst Mary Meeker.
Friar is now the CFO at Square (where former Goldman CFO David Viniar is a board member.) Khan is Snapchat’s chief strategy officer. Masters is the head of a bitcoin-related startup called Digital Asset Holdings. Meeker is a partner at Kleiner, Perkins.
Friar and Viniar were considered big hires when they joined Square a couple of years ago, and their presence has done much to quell worries about the company’s longtime inability to make money.
As Snapchat rolls through executives—most recently it lost chief operating officer Emily White—Khan’s presence provides stability. The former banker worked on the Alibaba public offering, and his arrival at Snapchat was seen as a significant step on the company’s journey toward an IPO.
Lots of bitcoin startups have tried to find an audience for their payments technology, especially on Wall Street. Masters, who helped pioneer the use of derivatives such as credit default swaps, may help convince financial firms to embrace Digital Asset’s products.
Meeker, one of the best known tech analysts on Wall Street during her heyday, has recently helped Kleiner defend itself in a high-profile court case involving charges of gender discrimination and retaliation. Meeker’s annual presentation on Internet trends has helped put Kleiner on the map as a Silicon Valley thought leader.
Boards of tech companies that are targeting the market for financial transactions are stocked with former Wall Street elders who can help them develop strategy and forge important business connections.
Ex-Morgan Stanley CEO John Mack, ex-Citigroup CEO Vikram Pandit and Larry Summers, the well-known policymaker who has worked through every major financial crisis of the last 20 years, are all on the board of Lending Club—a company that matches borrowers (usually consumers) with lenders (usually hedge funds).
Pandit is also an investor in a bitcoin-related startup called Coinbase, and he and Mack invested in Dataminr, a data analytics company.
For their part, the Wall Streeters get some combination of prestige and money when they land in Silicon Valley. Finance is now less profitable and much less glamorous than it was 10 years ago, when bankers ruled the business world, mergers and acquisitions gurus walked the land like giants, and hedge fund titans racked up huge paydays. None of that has entirely disappeared, of course, but there’s just not as much there, there.
If you’re Ruth Porat, comparing Morgan Stanley to Google is a useful exercise. Morgan had $34 billion in annual revenue last year, $4 billion in net income and has a market cap of $72 billion. Google’s revenue last year was $66 billion, it generated $14 billion in net income and the company has a market cap of $390 billion.
Banks have recently reported disappointing financial results and their stocks have, for the most part, lagged. Valuations at privately-held companies like Snapchat and Square have soared, while publicly-traded glamour pusses such as Twitter and Facebook are outperforming the market.
Porat’s departure is a notable loss for Wall Street, an industry that’s now down to a handful of female executives and increasingly few employees of any gender who spend their entire careers at a single institution. But it’s a win for the tech industry, and for any other companies that secure the services of A-list talent like Porat. Bloomberg