Is an MBA a Plus or a Minus in the Startup World?(techcrunch.com)
techcrunch.com
Is an MBA a Plus or a Minus in the Startup World?
http://techcrunch.com/2010/05/08/is-an-mba-a-plus-or-a-minus-in-the-startup-world/
46 comments
I'm a non-technical founder who's founded one startup, joined another, and am now an Advisor at TechStars - before I go back to B school to get an MBA. And that's after I did a business degree in undergrad.
To me, getting an MBA is all about option value. If I want to go to a big company, it's a prerequisite. If I want to do startups, it's not. If I want to jump back and forth, then it's a prerequisite again. I'm willing to pay $150,000 to have the option value of jumping back and forth for the thirty years after I graduate, not to mention the experience of the two years there, the network I'll have, and the other attendant benefits.
I wrote about this decision last week; maybe it'd be useful to some people here: http://www.sachinagarwal.com/why-this-startup-guy-is-going-b...
To me, getting an MBA is all about option value. If I want to go to a big company, it's a prerequisite. If I want to do startups, it's not. If I want to jump back and forth, then it's a prerequisite again. I'm willing to pay $150,000 to have the option value of jumping back and forth for the thirty years after I graduate, not to mention the experience of the two years there, the network I'll have, and the other attendant benefits.
I wrote about this decision last week; maybe it'd be useful to some people here: http://www.sachinagarwal.com/why-this-startup-guy-is-going-b...
Exactly the kind of the logic that people use to justify going into the corporate world instead of a startup. For people serious about building a successful startup the possibility of going back to a cushy corporate job if things don't work out should be the last thing on their mind.
So should health insurance by that logic.
In the Startup World, it's not the MBA that matters, it's you!
I don't know much but I have a slight doubt whenever I read something like this. I presume you get an MBA to give you a better understanding about business. And startups are in essence businesses. Then how come having a better understanding not impact your startup?
The cause of the apparent paradox is that "business" spans a huge range. MBAs train you to be junior officers in the armies of managerial capitalism. But there is almost zero overlap between that sort of work and what startups do.
MBAs train you to be junior officers in the armies of managerial capitalism.
Some MBA programs do -- most, even. But more and more programs are focusing on entrepreneurship.
I think it is pretty obvious that having an MBA is useful if you're going to do a startup. Is getting an MBA more useful than spending the time/money on something else? Perhaps, perhaps not -- depending on the person involved, the skills of their cofounders, the type of the business, and so on.
Some MBA programs do -- most, even. But more and more programs are focusing on entrepreneurship.
I think it is pretty obvious that having an MBA is useful if you're going to do a startup. Is getting an MBA more useful than spending the time/money on something else? Perhaps, perhaps not -- depending on the person involved, the skills of their cofounders, the type of the business, and so on.
Actually I would say it's a slight net minus to have an MBA when doing a startup. You learn nothing of use to you, but investors discriminate against you slightly.
Almost all investors are looking for founders who match past stars. So what they're looking for at this point is hackers.
I have to say I agree with them. I can't imagine Bill Gates or Larry & Sergey enduring B School.
Almost all investors are looking for founders who match past stars. So what they're looking for at this point is hackers.
I have to say I agree with them. I can't imagine Bill Gates or Larry & Sergey enduring B School.
You learn nothing of use to you
For a small percentage of startups, that might be true, but I think it is far from true for most startups. Consider the 1-year "mini-MBA" at Duke that Wadhwa mentions, which covers "marketing, finance, intellectual property and business law, and management." You would really suggest that this training offers nothing of value?
Again, there might be more efficient ways to spend your time/money, but for the vast majority of startups, that is a very useful skillset to have, particularly if it complements technical knowledge.
Maybe that knowledge isn't useful if the founder is content to handle only technical stuff, the startup remains small, and the company doesn't have any paying customers. Seems like a pretty big limitation to me though.
For a small percentage of startups, that might be true, but I think it is far from true for most startups. Consider the 1-year "mini-MBA" at Duke that Wadhwa mentions, which covers "marketing, finance, intellectual property and business law, and management." You would really suggest that this training offers nothing of value?
Again, there might be more efficient ways to spend your time/money, but for the vast majority of startups, that is a very useful skillset to have, particularly if it complements technical knowledge.
Maybe that knowledge isn't useful if the founder is content to handle only technical stuff, the startup remains small, and the company doesn't have any paying customers. Seems like a pretty big limitation to me though.
You would really suggest that this training offers nothing of value?
Pretty much. Early stage startups don't need to know anything about finance, business law, and management. All they need to know about IP I can tell them in 5 minutes. As for marketing, it depends what the schools teach, but startup marketing is so unusual and varies so much depending on the product that I would be very surprised if a B school class had anything useful to say about it.
Pretty much. Early stage startups don't need to know anything about finance, business law, and management. All they need to know about IP I can tell them in 5 minutes. As for marketing, it depends what the schools teach, but startup marketing is so unusual and varies so much depending on the product that I would be very surprised if a B school class had anything useful to say about it.
Do you think that every investment you make is in the next Google or Microsoft? How about other investors? It seems like if you were specifically looking for the next Google or Microsoft that would be a great thing, but what if your not.
Do you think that the majority of investments you make (which likely aren't going to be the next microsoft or google) could be better done with an MBA on the team? Has this really been even tried in the startup world since the dotcom bust? I am not saying the way you in vest in founders is wrong by any means, but could VC's be missing out do to a bias of trying to find the next microsoft when in reality they know the company they are looking at is likely only acquisition bait?
Do you think that the majority of investments you make (which likely aren't going to be the next microsoft or google) could be better done with an MBA on the team? Has this really been even tried in the startup world since the dotcom bust? I am not saying the way you in vest in founders is wrong by any means, but could VC's be missing out do to a bias of trying to find the next microsoft when in reality they know the company they are looking at is likely only acquisition bait?
We hope every investment we make is the next Google or Microsoft, in the sense of growing very big. Remember that when Microsoft started, it was two undergrads making Basic interpreters for what were then called "hobbyists."
I don't think the majority of companies we fund would be better off if some of the founders had MBAs, no. It would at best not be harmful. What makes startups succeed, at our stage, is building products users like, and I have seen no evidence that an MBA gives you any advantage there. In fact I've probably seen evidence to the contrary.
I don't think the majority of companies we fund would be better off if some of the founders had MBAs, no. It would at best not be harmful. What makes startups succeed, at our stage, is building products users like, and I have seen no evidence that an MBA gives you any advantage there. In fact I've probably seen evidence to the contrary.
Do you think there could be an MBA program that teaches relevant things to what start ups do? and what would it teach?
I feel in some ways part of what Y Combinator does is like an extremely condensed business school that is relevant to start ups.
YC "spend[s] much more time teaching founders how to pitch their startups, and how to close a deal once they've generated interest." YC also invites speakers to share their knowledge http://ycombinator.com/w9speakers.html
I think the ultimate educational experience for a future start up entrepreneur would combine what Ars Digita University taught (programming) http://www.aduni.org/, web design, the relevant aspects of business, a bit of elementary worldly wisdom http://ycombinator.com/munger.html, and to top it all off the school would require the students to work on a start up as a side project.
I feel in some ways part of what Y Combinator does is like an extremely condensed business school that is relevant to start ups.
YC "spend[s] much more time teaching founders how to pitch their startups, and how to close a deal once they've generated interest." YC also invites speakers to share their knowledge http://ycombinator.com/w9speakers.html
I think the ultimate educational experience for a future start up entrepreneur would combine what Ars Digita University taught (programming) http://www.aduni.org/, web design, the relevant aspects of business, a bit of elementary worldly wisdom http://ycombinator.com/munger.html, and to top it all off the school would require the students to work on a start up as a side project.
Startups are one of those things that are best learned by doing, so YC pretty much already is what you're talking about. We've tried to make it the optimal way to learn about startups. But YC is structurally so different from a university that I don't think they'd be able to evolve very far in this direction.
There's a discontinuity between investment firms and schools. We've taken the investment firm and made it a lot like a school, in much the same way that seals became a lot like fishes. But as with seals and fishes, there is an unbridgeable gap despite the surface similarities.
There's a discontinuity between investment firms and schools. We've taken the investment firm and made it a lot like a school, in much the same way that seals became a lot like fishes. But as with seals and fishes, there is an unbridgeable gap despite the surface similarities.
Something like http://www.founderinstitute.com/ seems useful to me - that plus a degree in computer science and design plus a term in Y Combinator.
(there are alternatives to Founder Institute that don't seem quite so MBA-ey, too)
(there are alternatives to Founder Institute that don't seem quite so MBA-ey, too)
Agreed. But you link to HBS's "Working Knowledge" in the YC library. Is there much good stuff there? HN voters don't seem to think so.
(That link in the YC lib broken now, btw. It's redirecting to their front page. You want this now: http://hbswk.hbs.edu/topics/entrepreneurship.html)
(That link in the YC lib broken now, btw. It's redirecting to their front page. You want this now: http://hbswk.hbs.edu/topics/entrepreneurship.html)
Because this assumption is false.
I don't get this either or thing. I got a BSc in Computing Science when I was a kid. I'm 30 now and preparing for the GMAT. I also keep abreast of the latest on the lean startup and on the fat startup. Why not learn it all?
In my opinion you're the ideal MBA candidate - undergrad in either engineering or a science, some work experience, then the MBA. The problem is that so many MBAs have undergrads in Business and go straight to the masters without any intervening work experience. So they don't have experience and the courses have a lot of overlap. They give the MBA a bad name, but they're the cash cow of business schools.
I actually think very few go from undergrad to their mba without work experience. Look at the average years experience for top grad schools. It is normally 3+ years on average. I am about to go to Notre Dame for an MBA and I have just under 3.
It is all great to pick on people who have a business undergrad and mba, but sometimes in life people don't know what they want to do at the undergrad level. I did not start my business undergrad thinking I would get an MBA, but it becomes the logical career move later on. I am way excited for where I am going now with it, but double business isn't inherently a bad thing in some industries.
For me I want to get more into tech, so I am teaching myself rails. People always talk about learning business on their own, why can't someone also learn programming on their own?
It is all great to pick on people who have a business undergrad and mba, but sometimes in life people don't know what they want to do at the undergrad level. I did not start my business undergrad thinking I would get an MBA, but it becomes the logical career move later on. I am way excited for where I am going now with it, but double business isn't inherently a bad thing in some industries.
For me I want to get more into tech, so I am teaching myself rails. People always talk about learning business on their own, why can't someone also learn programming on their own?
It's often business degree -> analyst at a bank or consultancy -> MBA -> associate at bank or consultancy -> industry job when it becomes apparent that partnership isn't on the horizon.
The problem with MBAs of this type is that they believe management is a universal function that can be applied directly to any industry. The real world is more subtle than that.
The problem with MBAs of this type is that they believe management is a universal function that can be applied directly to any industry. The real world is more subtle than that.
As long as the recruiters keep believing that "management is a universal function that can be applied directly to any industry", students can hardly be blamed for it.
Actually I think that's true, but it takes experience to gain sufficient humility to know that you have to respect the differences in domains. Obviously (for example) manufacturing is different from software, but motivating people, managing costs, solving customer problems - those are universal.
Where I live (India) most of the MBAs are Engineering or Science Graduates. This year only 9 people from business and 1 from arts got into IIM-A. Its a common choice among Engineers to take up MBA after there Graduation (BE/BS/B Tech).
It kind of annoys me though. Its fine if you are doing an specialization in something like Project Management, Computer Management, E-Commerce or something like that. But it just bugs me if you take up finance or banking. WTF? If you wanted to do finance or banking why the hell did you waste the one seat of Eng/Sci student. In a country where there is already a shortage of Quality Engineering studies, these people take there education from IIT and then join IIMs taking up banking or finance. This is a total waste of the Rs 900,000/- the government is spending on each IIT student. I just hate to meet someone working in a bank and them mentioning "I did an B Tech in Electrical from IIT then went to IIM".
Either I am missing the node joining finance and banking with engineering or this is really just the product of the herd mentality students here have. Its a trend now to go for MBA and they would take any branch if they get into an IIM, "Why bother, its IIM!!!".
It kind of annoys me though. Its fine if you are doing an specialization in something like Project Management, Computer Management, E-Commerce or something like that. But it just bugs me if you take up finance or banking. WTF? If you wanted to do finance or banking why the hell did you waste the one seat of Eng/Sci student. In a country where there is already a shortage of Quality Engineering studies, these people take there education from IIT and then join IIMs taking up banking or finance. This is a total waste of the Rs 900,000/- the government is spending on each IIT student. I just hate to meet someone working in a bank and them mentioning "I did an B Tech in Electrical from IIT then went to IIM".
Either I am missing the node joining finance and banking with engineering or this is really just the product of the herd mentality students here have. Its a trend now to go for MBA and they would take any branch if they get into an IIM, "Why bother, its IIM!!!".
Good point. Although, I have to add that the trend has already reversed. Most IITians now consider IIMs beneath them. "Only mediocre crowd goes to IIMs" says a recent fresh graduate from IIT Kharagpur.
The reason is that IIT grads are now able to get the same jobs and roles as the IIM grads - McKinsey / BCG / Goldman Sachs / and other investment banks have been regulars at IIT campuses for quite a few years now. Their reasoning goes that why not catch this talent early instead of getting the same bunch of people from IIMs a few years later.
It's indeed sad that there is not enough money in the core engineering disciplines yet.
The reason is that IIT grads are now able to get the same jobs and roles as the IIM grads - McKinsey / BCG / Goldman Sachs / and other investment banks have been regulars at IIT campuses for quite a few years now. Their reasoning goes that why not catch this talent early instead of getting the same bunch of people from IIMs a few years later.
It's indeed sad that there is not enough money in the core engineering disciplines yet.
The problem is not money in this case. There was never the equal amount of money in Engineering that they have in business. The problem here is that there is not passion amongst the engineering graduates in general towards there discipline. Most join engineering because there peers are joining or there parent told them to. It is indeed sad that students think in pure monetary terms rather than there passion. I have seen many engineering undergrads who wanted to go into fine arts and joined up just so because there "uncle" told them to.
What's an IIM and IIT? How much is 900k Rs?
[deleted]
IIM : Indian Institute of Management. These are the most premium B-schools of India supported by Indian government.
IIT : Indian Institute of Technology. These These are the most premium tech schools of India supported by Indian government.
900 000 Indian rupees = 19 758.6 U.S. dollars
IIT : Indian Institute of Technology. These These are the most premium tech schools of India supported by Indian government.
900 000 Indian rupees = 19 758.6 U.S. dollars
IIT - most selective school on the planet. Much more competitive than Harvard.
Your comment inspired me to do some research, and the first page I found was this one: http://www.kamalsinha.com/iit/acceptance-rate.html
Given your comparison to Harvard, I thought you might be interested in this paragraph:
>While it seems true that admission rate at IITs is less than even the most selective US school like the CalTech, it does not mean IIT recruits students of higher caliber. In a country like the USA, educational resources were well developed and the enrollment capacity for engineering majors is kept about the same as the number of seniors intending to enter those programs, if not more. It means less desparation. Moreover, there are lot of top-notch schools schools of about equal caliber which decreases their selectivity figures. My guess is that the top 50 engineering schools in the USA exceed IITs in almost all respect and another 100 or so other schools are not far behind.
Given your comparison to Harvard, I thought you might be interested in this paragraph:
>While it seems true that admission rate at IITs is less than even the most selective US school like the CalTech, it does not mean IIT recruits students of higher caliber. In a country like the USA, educational resources were well developed and the enrollment capacity for engineering majors is kept about the same as the number of seniors intending to enter those programs, if not more. It means less desparation. Moreover, there are lot of top-notch schools schools of about equal caliber which decreases their selectivity figures. My guess is that the top 50 engineering schools in the USA exceed IITs in almost all respect and another 100 or so other schools are not far behind.
glen is probably referring to the ratio of the number of successful applicants to the total number of applicants - which is about 1% ( about a decade and half ago, maybe even less now).
I don't know whether it makes any sense to compare the calibre of students coming from colleges in different countries with vastly different cultures in the absence of results from common tests.
However, these people are definitely among the best from a populous country where education has a status closer to religion and is also a ticket to earn legal income disproportionate to efforts expended.
I don't know whether it makes any sense to compare the calibre of students coming from colleges in different countries with vastly different cultures in the absence of results from common tests.
However, these people are definitely among the best from a populous country where education has a status closer to religion and is also a ticket to earn legal income disproportionate to efforts expended.
Yes, I knew that's what he was referring to. But the comparison to Harvard was obviously intended to imply something more, thus my quote.
It was a very good plug for the authors' own classes that he teaches (link in the last paragraph).
I don't mind it. Almost everyone plugs their own stuff in guest posts on TC, and I've read plenty of Vivek's brilliant posts to allow a plug like that in the latest one.
I do mind the fact that he maintains his affection towards the MBA and disagreement with Guy although he clearly believes an intense one-year program that focuses on the important bits is a better alternative.
Being in a start up is a game. We have an idea and we are playing the game to make that idea as successful as possible. We need tools in this game - engineers, lawyers, accountants etc.. are all tools. Some tools are more useful in the beginning than others. Some tools become more important as our startup matures.
Now MBA is this awesome general degree that teaches you a bit of everything - accounting, sales, some business law. This makes you a versatile tool! :D. The question is, do you know how to best serve a startup? What can you do? What do you want to do? How will you make up for your lack of experience in a certain area - can you learn quickly? Adapt?
Many startups these days start out with the core team being engineers - they're looking to build something, so it makes sense. That said, some startups may do well with a gritty MBA who can go out there and talk to tons of people to generate / prove ideas and report back to the engineering team; take care of accounting; HR stuff if need be; etc... basically it means being the CEO from day one without worrying about the title.
Is that what you're looking for or do you just want a cusy desk job as a junior manager? ;)
Now MBA is this awesome general degree that teaches you a bit of everything - accounting, sales, some business law. This makes you a versatile tool! :D. The question is, do you know how to best serve a startup? What can you do? What do you want to do? How will you make up for your lack of experience in a certain area - can you learn quickly? Adapt?
Many startups these days start out with the core team being engineers - they're looking to build something, so it makes sense. That said, some startups may do well with a gritty MBA who can go out there and talk to tons of people to generate / prove ideas and report back to the engineering team; take care of accounting; HR stuff if need be; etc... basically it means being the CEO from day one without worrying about the title.
Is that what you're looking for or do you just want a cusy desk job as a junior manager? ;)
I think an MBA can be helpful in the right situation/startup, but in other situations it might not be needed or the person might need to unlearn some things. It's the debate between B-School and E-School (Entrepreneurship School advocated by Steve Blank).
Related Reading Which You Will Find Useful:
The Simple MBA Manifesto: Do We Really Need MBAs? A Presentation http://www.slideshare.net/pramitsingh/the-success-manual-do-...
Presentation Transcript is Available Here http://bighow.com/news/the-simple-mba-manifesto-do-we-really...
Do we need MBAs? A 5- part look http://bighow.com/tags/doweneedmbas
I was a founder at consecutive startups years ago and I recently got my MBA. One thing I can attest, if I had my MBA in the past, it would have helped to run the startups more productively and efficiently.
I don't think this debate will really be settled until we have actual data to deal with, which isn't likely to happen any time soon, because you'd have to observe the same people with, and without MBA's.
We actually do have some data, but a little thing like facts never hinders an uninformed opinion.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1127248
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1127248
That's an interesting read. Some conclusions about US-born tech startup founders include: (1) they tend to be 30+ years old, (2) they tend to have advanced degrees, especially from ivy-league schools, and (3) those with advanced degrees tend to create bigger companies, especially if they went to ivy-league schools.
I didn't see any commentary on whether someone who is older or has a degree is more likely to succeed in their venture at all. This study couldn't address that question because the survey sample was composed entirely of people who had already reached a certain threshold of success. I find the study interesting mainly because it hints at the answer to this related question, and would love to see some data that addresses this issue more directly.
I didn't see any commentary on whether someone who is older or has a degree is more likely to succeed in their venture at all. This study couldn't address that question because the survey sample was composed entirely of people who had already reached a certain threshold of success. I find the study interesting mainly because it hints at the answer to this related question, and would love to see some data that addresses this issue more directly.
[deleted]
The thing that puts me off doing an MBA is the time and the cost. One or two years is a long time to not act on an idea if you've already got some in your head. If you don't already have some startup ideas in your head and you're thinking of doing a MBA I would argue that you're not really a startup person. There are lots of people that want to be an "entrepreneur" but don't have any actual startup ideas.
The cost is my biggest worry though. Having a £50,000 dept with £700/month repayments really does put a dampener on the idea of bootstrapping a startup. Hence why so many MBA graduates end up doing investment banking or consulting.
Me - non-coder, lots of startup ideas, entrepreneur wanabee, business school interview in a week!