- Former Goldman Sachs partner Sumit Rajpal is starting his own investment firm.
- He has identified one or two investments and is raising money for the transactions.
- Rajpal has poached employees from Goldman, angering some of his former colleagues.
- See more stories on Insider’s business page.
A former co-head of one of Goldman’s most prized investing units is now raising money for his own venture — and his former employers aren’t pleased.
Sumit Rajpal is out raising money for a fund that will invest in banks, fintech firms, and other finance-related companies, according to people with knowledge of the matter.
He’s looking closely at financial-information firms that can benefit from using technology or artificial intelligence to compete, and has already found one or two potential investments, one of the people said.
He’s also gone back to Goldman for talent, angering his former colleagues. Goldman managing directors Matt Popper and Susan Yan have left the bank to join Rajpal, another person said. Two other junior members of Goldman’s asset management division have left Goldman to join Rajpal, the person said.
Representatives for Goldman Sachs and Rajpal declined to comment.
Rajpal joined Goldman Sachs in 2000, briefly worked as a financial institutions banker, and made partner ten years later at the age of 34.
He helped revamp Goldman’s private-equity business after the passage of the Volcker Rule — leading to a $7 billion fundraising in 2017 for what was the firm’s first private-equity fund since the financial crisis — and was responsible for some of the bank’s most successful private-equity style investments in financial companies.
He briefly co-ran Goldman’s merchant banking business after its merger with the bank’s special situations group, before internal conflicts and turf battles led him to leave last February, Insider previously reported. Two months later, he joined the Securities and Exchange Commission as a senior adviser.
Several other senior Wall Street executives are joining Rajpal in his new venture, the people said. Insider couldn’t immediately learn the identity of Rajpal’s partners.
Rajpal has also sought to raise money from some of the same limited partners who invested with Goldman when he was there, one of the people said.
Rajpal achieved some notable successes at Goldman. Among them: He represented Goldman on the board of TransUnion after it bought a stake in the credit-reporting company, an investment that made at least $2.8 billion for the bank.
He also helped come up with the idea for Marcus, the firm’s suite of digital banking products. Since being opened to consumers in 2016, it has collected $100 billion in deposits, made $8 billion in loans, and generated $1 billion in income last year. Marcus just started offering a wealth management product for the masses.
Goldman claps back
Goldman’s recent actions toward Rajpal bear out its displeasure with its former employee, two of the people said.
The company, for example, has refused to allow Rajpal to use his data on past returns in his fundraising pitches, one of the people said. Potential clients often like to see a money manager’s returns before contributing funds to a new venture. Investors who set out on their own typically make arrangements with their old firm to use their investment track record in pitches to new investors.
Goldman, which often helps connect alumni to new investors or find needed seed capital, won’t lend a hand for Rajpal’s new venture, one of the people said.
Many of Rajpal’s ties to Goldman were severed when he joined the SEC. Government ethics rules require incoming officials to divest themselves of any stock that might present a conflict of interest, according to one of the people. The same policy means cutting other contractual obligations as well, such as non-solicitation and non-compete agreements, the person said.
In response, Rajpal divested his Goldman stock and agreed to a common one-year non-solicitation agreement, eliminating two levers that Goldman could have used to prevent him from talking to Goldman employees or investors, one of the people said.
Former Goldman president Gary Cohn triggered a similar policy when he left the company in late 2016 to join Donald Trump’s administration as Director of the National Economic Council. When Goldman settled the investigations over its role in the 1MDB fraud, it sought to clawback deferred compensation from executives, including Cohn. The former Goldman president refused, and ultimately donated some money to charity, Bloomberg reported.
However, Rajpal’s sales of Goldman stock last year meant he missed out on recent gains, as Goldman shares have surged to a record.
A controversial merger
Rajpal left last February in the midst of a major shakeup inside Goldman.
As Goldman CEO David Solomon embarked on a new strategy, he turned his attention to the merchant banking division, where Rajpal had spent much of his career. Run for a long time by Goldman partner Rich Friedman, the business operated much like its own private-equity firm inside a sprawling Wall Street institution.
The division was a Goldman crown jewel, and Solomon sought to reorganize it so that the bank could better market its investing prowess to outside investors. But before doing so, Solomon merged it with another powerhouse investing team within Goldman, the securities division’s special situations group.
The merger meant combining two groups with vastly different cultures, run by executives who were used to doing it their own way. Friedman gave up day-to-day operations and handed that job off to his hand-picked lieutenants, Rajpal and Andrew Wolff. Julian Salisbury, the special situations chief, was named the third co-head.
The culture clashes meant the tri-head structure was in trouble from the start, and after much wrangling, Rajpal, who had run private-equity strategies before becoming the division’s co-head, and Wolff left in February 2020, leaving Salisbury as the sole head of the division.
Solomon tapped him to co-head the larger asset management division, which included the merchant bank, late last year. Eric Lane, Salisbury’s fellow co-head, announced his exit earlier this year.