5 Reasons Why An MBA Is Useless For A Startup
Let’s play a guessing game. In 1998 he co-founded a firm with Max Levchin. Then started and managed his HF, Clarium Capital. In 2004, he angel invested in FB with a 10.2% stake as a VC. Who am I? For all of his success and wealth, not to mention a college education in law from Stanford, in 2010 he launched his own Fellowship which aimed to deter twenty under-20 young adults to quite college and pursue their own ventures. If you guessed Peter Thiel, then you’re right. Now a couple entrepreneurial MBA candidates share a similar view and have realized…that B-school is relatively useless! Read on to find out what they have to share about their education and experiences…
MARIA BRILAKI, Founder of fitnessreloaded.com
Maria has a B.S in Engineering from Stanford, is the author of Surprisingly…Unstuck: Rewire your brain to exercise more, eat right, and truly enjoy doing so, and is a current MBA candidate. To summarize, in her own words:
…the MBA is made for managing established companies, not startups!
Her experience has shown that the fundamental difference is certainty. In b-school you get a syllabus, assume the existing customer base and product histories. Also, if you don’t know a key metric you can always ask questions and get answers.
In a new venture there is no syllabus, you don’t know what the product is or how to price it, let alone the desires of your potential customers. Oh, and if you want to get a key metric there’s no all-knowing professor to ask for answers and in her words, “you have to make it all up as you go."
JOESPH DRASCHIL, Founder of spygames.com
Joseph is currently participating in Start-Up Chile and is a Babson MBA candidate. His co-founder, an MBA graduate admits that he can execute a business plan but he’s not equipped to turn an idea into a functioning business! Problem is, Draschil’s b-school professor who teaches a course on writing business plans repeatedly tells his class that upon completion it, “…is pretty much outdated as soon as it’s finished.”
Getting back to Brilaki’s point about certainty, he adds that they’re drafted in stable environments with key assumptions which can get you a good grade but thinks it's unrealistic in a working world application. Further, he admits to not knowing how to go about finding a business model that would work and adds,
I wasn’t finding the answers in my MBA courses."
Here's my summary of Birlaki's 5 THINGS NOT LEARNED AS AN MBA...
1. Customer Analysis: Unlike cases studies and exercises with assumptions already made, in the startup world you need to go out and find these facts from experience.
2. Pitching Customers: There is no selling class in B-school and having persuasive skills to convince people to buy is essential to growing.
3. Making Stuff Happen: As an MBA candidate, you’re not involved in running a business per se, more like following instructions. In Maria’s case she had to shoot videos, build websites, and create mobile apps. The business starts at ends with you as the center of operations not simply doing a modular project or assignment.
4. Creativity: It’s a must! One needs to come up ideas and iterate them quickly in order to grow on a regular basis. I know personally that if I’m not impressing or over-delivering on my services then I’m not creating value. Good grades don’t necessarily equate to creative genius and it’s entirely possible to graduate still thinking inside-the-box.
5. Effective Writing: E-mails, approaching media, professional networking and mentoring, there are no classes taught on how to do this according to Brilaki.
A USEFUL DEGREE?
Let’s not throw the baby out with the bath water per say. Both entrepreneurs find value pursuant to their MBA’s. Brilaki thinks that it’s better suited to established firms and admits that some of her knowledge is transferable to her startup. Draschil goes a bit further, and is learning how his assumptions turn into facts. He’s doing an independent study on business model discovery and development which will lead him closer to execution where he admits that he can start to flex his MBA muscles. Subsequently, he gives two pieces of advice for pursuing an MBA before doing a venture…
1. Startups aren’t established business and require a different approach, so think creatively!
2. Business skills and education aren’t feasible during the discovery stage but will be during execution.
With that said, let’s hear it monkeys! What's your opinion? DO YOU THINK AN MBA IS NECESSARY WHEN STARTING A NEW VENTURE?
An MBA is definitely not a necessity; if anything it can be a waste of two years that could otherwise be used learning from failures in the field. What it does provide are tons of inspirational individuals who you could build a startup around.
I don't think its a necessity, but I can see the merit behind it. If someone worked for whoever before entering an MBA program (let's talk Top 5 here) and wants to start something, the period of an MBA is a pretty good one to do so as you have the safety net of OCR. At HBS there are even course that make you start a business and build it out etc.
I agree, an MBA is definitely not necessary to run a successful startup based on the stuff that you learn. However, I feel that in a top MBA program, you will meet people who are just as driven as you and are talented enough to create a successful startup.
Assuming you already know exactly what you want to do, would you really decide to invest 150-200k in school or put it straight into the business? Seems like a fairly straightforward choice to me....
Honestly, you should only look at getting an MBA if your career has plateaued or someone is going to pay for it.
Can a top MBA help you raise a lot more $ initially? I believe so; due diligence is easier when your entrepreneur is an HBS grad, and so are a lot of other things, either way an MBA is a door opener rather than closer.
An MBA is one form of networking; however, I believe history shows us that an MBA merely prepares you to help run a company at a higher level.
List of the top 12 entrepreneurs of our time:
Steve Jobs - Attended Reed College - Dropped out - Did not study business Bill Gates - Attended Harvard - Dropped Out - Did not study business Fred Smith - Yale - Bachelors in Economics - Captain in Marines - Did not study business Jeff Bezos - Princeton BS Electrical Engineering and Computer Science - Did not study business Larry Page and Sergey Brin - MS from Stanford - Did not study business Howard Schultz - North Michigan - Degree in Communications - Did not study business Mark Zuckerberg - Harvard - Dropped Out - Did not study business John Mackey - Texas At Austin - Studied Philosophy and Religion - Did not study business Herb Kelleher - Weslayen University - Bachelors in English - JD from NYU - Did not study business Narayana Murthy - University of Mysore - Degree in Engineering - Did not study business Sam Walton - Missouri - Bachelors in Econ - Did not study business Muhammad Yunus - PhD Economics Vanderbilt - Did not study business
The closest thing we have to business up there is Econ and as an individual with a degree in Econ, I can assure you, it is not business focused.
What do all of these revolutionary individuals have in common? They started a business based on crafts and knowledge they had studied or were familiar with. You didn't see someone go out of their way to get an MBA when their field was in computer science. A great example of this is Sergey Brin pursuing a PhD (albeit slowly) from Stanford. Hint: It isn't in business.
I'm not sure where your list came from, but Wayne Huizenga and Richard Branson would easily make my top 10.
An MBA is not useful for running your garden variety startup for the same reason it is not useful for winning a lottery.
A startup does not require the level of knowledge an MBA has. For a startup, the business related knowledge you need is really simple, if not primitive: basic accounting/finance and basic marketing. I might be even a bit generous about accounting/finance.
All these project managements, corporate finances, operations managements, supply chain managements, managerial economics, advanced international marketings, organizational behaviors, and other fancy classes do not matter at all at early stage.
Sales skills are critical, but the only way to learn them is to try selling in real life. MBA or any other degree won't help in that.
Creativity, IMHO, is hugely overrated. You don't need to be creative to make money. In fact, most successful companies are boring and mundane, and often me-too businesses.
Peter Thiel teaches a class at the Stanford GSB. What is your agenda?
Peter Thiel's class was actually in the comp sci department. Source: my boss is a GSB lecturer.
Here's the notes from his class: http://blakemasters.tumblr.com/peter-thiels-cs183-startup
So poorly written.
Nice responses everyone and thank you for your comments! It seems like everyone here pretty much agrees that an MBA is not required for a new venture. Aside from that I'd like to address a few comments...
My agenda is about MBA’s not Peter Thiel and I’m just stating his facts. I’d be open to knowing why you think it’s so poor but if you’re going to properly criticize my writing I suggest not using sentence fragments. I would appreciate it if you could tell me where and when this subject was also posted?I brought this point up to Andy and he didn’t seem to think it was an issue even though it’s happened before with myself and Edmundo Bravermann. Thanks!
My post was a double post, and I edited the duplicate with the text "double post".
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