The fact that finance is ripe for (and now rife with) technological disruption is one factor pushing the bankers in that direction, but the primary one since 2008 has been this: it's the gold rush of the decade.
A certain portion of the population, including most of the type-As, consistently pursue whatever opportunities promise the most money and prestige in the shortest time for the least work. Until the financial crisis, the best path to that end was getting rich as a trader. Now, startups offer greater risk but even faster and more tantalizing rewards. The exodus of finance towards tech will continue exactly until the next investment winter, at which point it will likely turn into a flight from SV-style tech into yet another sector - my best guess is health and bioinformatics.
I worked in medical tech for a few years, there are a few reasons people aren't going to flood into that sector.
1.) Regulation, HIPAA is a massive pain to deal with, the rules nebulous and require significant process that is expensive and time consuming.
2.) Violations of HIPAA lead to fines and even lawsuits from the office of civil rights. It used to be that Business Associates could hide behind the medical institutions to avoid this but with the Omnibus rules you'll face massive fines that will easily bankrupt any startup.
3.) The entire healthcare sector is extremely risk averse, slow moving and you cannot work around them you have to work with them which means you're going to move slowly too.
4.) You will HAVE to integrate with dozens of other ancient applications that medical institutions use, some of which have no documentation or publicly available source code. I hope you like searching through hundreds of pages of outdated HL7 and X12 documentation to figure out how a specific vendor screwed up their implementation.
5.) Large medtech companies regularly snuff out competition through lobbying and leveraging existing relationships in the medical community. So you've got a killer new medical app that will change the world? Big deal, your competition has three doctors who are leaders in their field(and conveniently board members). They will tell all of their buddies at the next American Cardiology Conference that your app is garbage. I hope you've got some big names associated with your startup and you can pay them handsomely.
6.) The medical field is a data hell. Some of it unstructured and non-sensical, much of it is structured but has no validation. That field you are getting from a third party API for albumin levels which was documented as g/dL, was actually entered in mg/L from the years 06/2004-12/2008, mg/dL from 09/2003-05/2004 and the proper documented g/dL for all other dates. Why was it that way? No one knows. You have to keep track of things like that for one field in one database for a single department in a medical institution with a few dozen departments that don't cooperate. Worst of all, it WILL change on you without you knowing.
> 1.) Regulation, HIPAA is a massive pain to deal with, the rules nebulous and require significant process that is expensive and time consuming.
> 2.) Violations of HIPAA lead to fines and even lawsuits from the office of civil rights. It used to be that Business Associates could hide behind the medical institutions to avoid this but with the Omnibus rules you'll face massive fines that will easily bankrupt any startup.
I agree with the last two-thirds of your post, but this doesn't match my experience. HIPAA is basically a bunch of "best effort" stuff and you can do shockingly little in terms of security and be fine by any audit I've ever seen. Unencrypted data at rest, encrypted data with keys on disk on the same machine, no SSL anywhere including external endpoints...and the auditors never asked or looked.
That sounds dangerously similar to saying, "... you don't have to actually follow the law, because no one checks, and you'll never get caught". Maybe it's my inner pessimism, or maybe I'm channeling Woody Allen, but I'd expect that I would end up being the poster child for What Not To Do were I to run a company that knowingly slacked off on HIPAA.
No, I'm saying that HIPAA and its related case law are vague enough to make "best effort" a matter of very permissive interpretation. The shitty state of technology and security (I do platform engineering/infrastructural stuff, so this matters to me) in medical startups, even worse than startups in general, is why I don't work for one anymore; I like sleeping at night.
My experience was vastly different and that's the problem. These aren't guidelines they are laws and you're at the mercy of whoever is investigating you. I'd rather not give too many details but one of the companies I worked for was fined a large amount of money after a security breach that was the fault of the hospital and not our application.
I think you're right on health/bioinformatics - Seeing a lot of VC money pointed at health/bio, and only expect this to increase. With 58% of VC-backed IPOs in 2014 being in healthcare related industries, there is an allure to invest more there (check out the bottom third of this datagraphic - http://blog.pitchbook.com/a-visual-breakdown-of-vc-in-2014/)
Software exits were still certainly the highest (470 in 2014), but those most commonly occurred through acquisition and far less through IPO. Health/bio saw over 200 exits in '14, with about half of them going public.
> Until the financial crisis, the best path to that end was getting rich as a trader.
I think you're pretty wrong on this. There was tons of money to be made as a trader post 2008 as the bonds pummeled by the crisis clawed their way bay to real/inflated levels with the help of the Fed buying everything site.
For the most part, HF's grabbed a good portion of these dollars. So the "most money and prestige in the shortest time for the least work" job post crisis has been to be a trader/PM at a hedge fund.
Having worked a a start-up in fintech, I can say the prestige is lowish, and the rewards are uncertain at best. There have just not been any insane price exits in fintech at all lately. Forget about a whatsapp style exit, I can't even name a Tumblr style exit.
I don't really think people are leaving finance for tech because it's a gold rush. Most of these guys are making half of what they made as an associate or VP. Even with all the money pouring in, exits aren't exactly that common. Even if they were, most of these people aren't going into executive, or technical or founder roles that they could make that much money off the exit.
But you do get to do much more interesting and rewarding work. You get to work in a collaborative and supportive environment You can wear whatever you want and enjoy the SF weather. And the hours are way better.
there is really too much regulation for a true disruption to occur, let alone any disruption might easily be perceived as criminal if the returns are too good either by over zealous Federal regulators or via subtle hints by your competitors to the same
A certain portion of the population, including most of the type-As, consistently pursue whatever opportunities promise the most money and prestige in the shortest time for the least work. Until the financial crisis, the best path to that end was getting rich as a trader. Now, startups offer greater risk but even faster and more tantalizing rewards. The exodus of finance towards tech will continue exactly until the next investment winter, at which point it will likely turn into a flight from SV-style tech into yet another sector - my best guess is health and bioinformatics.