Thoughts on Startups after B-School?
Hey monkeys,
Recently ran across this article that says "more than a third of the MBA graduates at Stanford and MIT started companies within three years of their commencement".
At one school after another, the rates of entrepreneurship within the three-year window are three to four times what they are at graduation, suggesting that MBAs are clearly smitten with the idea of doing their own thing. At the University of Pennsylvania's Wharton School of Business, for example, one in four grads in the Class of 2013 have started their own companies. That 25% level of entrepreneurship compares with 7.4% at graduation. At Harvard Business School, 22% of the MBA graduates have started companies, versus 7.0% while still in school.
I'm curious, how many of you monkeys have some sort of plan on startup a company in the future?
Many of the graduates who say they've started a company are often doing startup moonlighting, but there are exceptions. At Stanford, for example, 76% of the grads say they are getting most or all of their income from their businesses. Some 64% of grads at MIT Sloan and Dartmouth Tuck also rely on their startups for their primary income. Among Harvard MBAs, it's 43%, while among Wharton MBAs, the number is 45%.Often, that is a strategy to use the MBA to land a high-paying job to bring down student debt, while still pursuing a dream to start a company. Renata Arauz-DeStefano, who graduated from Wharton in May, is a good example. She launched an African-print apparel company, Mwayi, in her second year at Wharton but just started a job as an investment banking associate at Bank of America Merrill Lynch. She recruited another MBA to be chief operating officer of the startup so she can focus most of her energy on her i-banking job.
Perhaps some of you are taking this approach?
Personally, I feel as if I would have to put off my startup dreams to pay off B-School debt. Have any of you guys done this, or are currently doing so?
Have any of you guys started a business? Perhaps it is a small business that functions as a secondary source of income. Any thoughts?
You could also get funding for your startup if it is really that good.
Def a good point.
Getting funding is not a guarantee and often takes a while, sometimes years. Most startups begin with founders/friends/family putting up the initial seed money, and that's generally not sufficient to take a market rate salary. I went nearly three years with no salary when starting my company. We just closed our Series A after 5 years (we also did three prior seed rounds with angel investors), and I've just now started to take a reasonable salary. This is much more common in the startup world than tends to get portrayed in the media.
yeah I said 'could' and not 'will'
I didn't say it would be easy.
Congrats on getting yours going. It must feel nice after putting in all that sweat equity.
If you read about some of these start-ups, it's incredible how many obviously stupid or uneconomical ideas that otherwise highly intelligent people are pursuing, and I say this as a guy with a 9-5 and a start-up on the side. Seriously? African print apparel? Apparel is one of the most competitive industries on the planet. Creating a start-up in a highly competitive industry is a recipe for failure and a violation of one Peter Thiel's primary rules--your start-up should be in a business in which you could possibly create monopoly power because competition destroys profits.
A ton of entrepreneurs making a ton of the same mistakes over and over again. What do we learn from history? That we learn nothing from history.
I'd be Lion if I didn't say the Zebra did.
The goal is to crush the competition, not avoid industries because there is competition.
You can't control what you are passionate about. You love something and you go for it. Yes, apparel is very risky and most do not make it. But, you do what you love, put everything into it, do the research in the industry, make every attempt to form a competitive advantage, and then bust your ass to keep up the margins.
That position is asinine and is why so many businesses/start-ups fail (and why so many start-ups fail to raise capital since most VCs aren't interested in investing in saturated markets). There is a basic economic reality--large profits are competed away through competition. If you are competing then you are barely turning a profit, and without large profits you won't have a lot of capital to (re)invest. If you get into the clothes business you are doing so knowing that your bigger, bad-ER competition has economies of scale and brand recognition, and the likelihood of you taking their business is extremely low. Another reality--your passion isn't always a good business. Sometimes your passions are just good enough to be hobbies, or they are only economic enough for a small business and can't scale. Creating a business based on your passion is childish--somebody has to clean toilets, and somebody has to provide printing services, and some people have to provide fertilizer.
That is kind of amazing how many startups come out of Stanford MBA and other b-schools. MBAs have been traditionally for career-minded people. I wonder how going to one of these top-tier schools lend itself to entpreneurship - i mean why pay 200k+? Must be some cultural happening at these schools
I have never understood this either. Why take on all the debt if your goal is to start a company? I skipped getting a MBA and saved up enough money that allowed me to start my company and provided sufficient runway for going without a salary. I don't see how that is possible post-MBA.
Some kids are funded - I went for my MBA with full funding from my MBB firm and went back for 2 years to pay it off. I still work here, because I like consulting, but it's certainly still an option for me to go join or start a company.
That's a good point. I also wondered about this but: 1. I don't know how many people actually pay the full $200k+ and 2. getting an MBA provides nice downside protection, i.e. if you can't get anything off the ground within those two years, you can always go back and work for someone else.
Yeah that's true - downside protection.
That statistic seems high. I wonder what their criteria is for "starting a business" vs joining a startup.
Excluding scholarships, you're using about $150k tuition + $150k lost wages + $30k/year living expense to do b-school.
Basically that requires you to do whatever your heart sings. Otherwise who is stupid enough to waste that much money only to get back in their pre-MBA jobs?!
You really have all kinds of "attractive" opportunities at b-school if you work hard enough. The key question is which appeals to you the most. Banking/Consulting [$$$, prestige, credible work experience], industry work [work-life balance, CxO future], Nonprofit [social good], and entrepreneurship [You get to build something, yours]. Think about what you want, and not what your classmates do.
The startup craze at b-schools (Originally Posted: 02/22/2013)
It seems like every other student at top b-schools is interested in doing a startup. Many of them are already laying the grounds for it right now. I find this trend rather fascinating since I have mixed feelings about it. A few questions to ponder.
Is b-school the right place to acquire the skills needed to launch and run a successful business, especially if the startup is attempting to create essentially a new market?
Is this startup craze just the result of finance's downsizing? In other words, I wonder how many of these students would be working on this if the finance job market was as hot as it was pre-2008 crash.
From an admissions standpoint, are b-schools more aggressively targeting those in tech/startup space? When I look at my friends and acquaintances who applied, those with experience in this field fared a lot better than regular finance/consulting applicants.
startup and tech is the new sexy. it used to be buyside IM, then i think that took a seaat to PE, then tech came in but consulting is also the new sexy as well because it is what is seen as more desirable.
down in sao paulo there are tons of startup kids mainly hailing from wharton, HBS... i know other top MBAs have entrepreneurship programs and people who follow these paths but im very curious as to why most of them pursue domestic entrepreneurship programs vs the international paths
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