MBA and startups

I am a little late to the party, but earlier this week Dharmesh Shah posted on the “10 Things MBA Schools Won’t Teach You” if you are doing the startup thing. It was a great post and I agree with his points. I know I’m a bit new to the actually being an entrepreneur (ok, ok, pretending to be an entrepreneur), but I’ve thought about his ideas and came up with a few of my own. Keep in mind I can really only speak to my experience at Wharton; different MBA programs are probably pretty different and may teach these particular issues.

Sales – When I was a venture guy hanging around BOD’s, and now that I am trying to help Pixily with customer acquisition, it is quite clear to me that my MBA program lacked real “sales” education – yet this seems to be pretty much the most important part of taking a company from $0 revenue and product to $100 million and profitable. Selling is fricking hard. I thought selling money at Summit Partners was hard. Selling a product that has never been invented before from a company no one has ever heard of is really hard. You’d think that an MBA program would at least have some sort of a course on how large companies sell their product and:

Compensation structures – particularly for sales. There was certainly a class in one of our core courses around managing and incentivizing people, and I have to admit “Managing People at Work” taught by Peter Cappelli was one of my best courses (I actually dragged my wife to it a couple of times because it was so good.) However, compensation probably deserves its own course. Perhaps if I had been a management major I would have noticed the existence of a course on this topic… My experience as a VC was that a TON of time is spent setting up the correct compensation and incentive structure for the team and it doesn’t feel any less important from within an entrepreneurial venture.

Other major issues, not related directly to the course work, were:

Winner take all attitude – Too much emphasis on “being right” and not enough on admitting mistakes. If you want a good grade you need to pretend to be very certain – this works because you are likely doing a bschool project on an industry/space that no one else in the room knows anything about, so a firm voice will sell a lot of BS. But the opposite is true when trying to raise capital, or even worse when trying to actually grow a business. In the real world, if someone questions your plan you need to quickly decide if you don’t know the answer, and if you don’t you need to admit it and try to find out how to get the right data to get you the answer (assuming the question was an important one, that is.)

Debt load – It was clear that an MBA was expensive, but man, loan payments really kill the entrepreneurial drive. It’s hard enough when you have a house payment to make, it’s really hard when you have bschool loan payments plus a house payment to make. Also if your spouse got an MBA too then you are really, really burning a lot of cash every month. The loans really make people risk adverse… “Oh, I’ll just do investment banking until I’ve paid down my loans, then I’ll start a company” – well, I don’t know about that. Once you get used to a high paying lifestyle, leaving and starting a business is pretty  hard, especially if you’ve added some children to the mix or something. Since most people would probably want to start a company right out of school, vs. waiting a few years, the initial debt burden is too high. MBA programs need to come down in price if they are to really spawn entrepreneurial ventures. Unfortunately, most MBA programs probably subsidize other parts of the university systems, so price reductions are probably not in the cards.

I actually like my MBA

I don’t want readers to get the impression that I learned nothing from my MBA. It was a great experience, I met people who will be my friends and business contacts for the rest of my life and I had some really good times. However, if I had to do it again I may have considered the executive MBA program at Wharton. There is a very real difference between people in the Exec program, where managers are being groomed to become division leaders at large corporations, and the regular MBAs, who tend to gravitate more towards people who want to be (at least initially) service providers like consultants, bankers and gasp, venture capitalists.

Would I recommend getting and MBA? Well, I guess it depends on what you want to do and also where you are considering going for the MBA. I’m not sure I’d recommend taking time off from your career to go to a less than top program. If you want to start a company ASAP then you probably ought to just start the darn thing. If you want to get into investment banking, then by all means get an MBA. If you have absolutely no business background and are not confident that you’ll be able to figure out the basics on your own then an MBA makes sense. If you are stuck in a particular career or want to change industries then an MBA can help. A top tier MBA can also help you get into a later-stage startup, particularly if you use your summer internship wisely. However, spending a few years as a consultant (or, say, a venture capitalist) post  business school may not give you the concrete skills you need to jump into an early stage venture. Of course, if you are lucky, and also if you can afford it, you just might meet a real entrepreneur in business school who will let you work at his/her startup for free for a few months! :)

Author: Healy Jones

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9 Comments

  1. For the record, I absolutely loved my time at business school. I'd do it again in a heartbeat. Learned a bunch of cool stuff and met a bunch of great people.

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    • I finally got a comment out of Dharmesh! I had a good time at business school as well, but I do agree with you that there are some things that are hard to teach in school or that need to become part of bschool's curriculum if they are really going to train students to become entrepreneurs.

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      • "selling" is hard to teach partly because it is such a large topic and it has the unfortunate implication of manipulation. If I were to take a course on "medicine" – it would be a survey course at best. Taking a "sales" class — though very beneficial- can serve as a great introduction to the topic but is by no means a substitute for the topics of: enterprise sales, raising money, motivating employees, or getting the first customer at a new startup. I often see over-generalization when people discuss 'sales'. Early stage startups require a very specialized approach to sales. It is unfortunate that bschool does not teach 'sales' and at least touch on more specialized aspects of sales.

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  2. I'm glad I did an MBA. It was far from life changing, and a bit redundant given my Bachelors was also in business + I had an accounting designation. Still, what I valued from it was the frameworks for how to approach things. Structured approaches to unstructured issues. Plus, it is just sort of expected at senior ranks that you have an MBA. In my experience anyway…javascript:%20postComment(0);

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  3. getting one was one of the best decisions I've ever made. totally agree with your points above too. Loan payments make you more frugal on your side projects. A little more difficulty but it's amazing what you learn when you are stretching a buck.

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  4. Yes, those loan payments can be a b@#*h. Be glad you got it when you got it, as the price for schools got higher, even in times of recession…

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  5. I think you are 100% right. Selling is not taught at B schools. However, I am not sure how they will teach selling there, even if they wanted to. Selling is not an academic subject.

    If you are sure about starting a company and not do investment banking at all and want to do it only for the "knowledge", just go to a less than top business school so you can avoid the debt piece.

    If you are sure about getting into investment banking, consulting and the like, make sure you go to one of the really top schools. You are going to use the contacts you make.

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    • I do believe that there are some best practices to sales management, and this can be taught at bschools. While there is something very innate to selling, I am hopeful that people can learn how to sell. It is not treated as an academic subject right now by top schools – but I think it should be. Why couldn't controlled experiments be conducted to determine the most effective techniques? Why can't surveys be done on effective sales people? I think it's a pretty cool subject.

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  6. MBA is quiet very good course, its also very expensive, but it is gives so many jobes opporchunity, and I'm agree with your points,..

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