Response to the discussion at the SIE-hosted session on entrepreneurship at institutes for higher education.
Part of our Stanford REE Series from the Roundtable on Entrepreneurship Education.
One of the great advantages of starting a company at university is the wealth of human resource at arm’s reach. Student-entrepreneurs are surrounded by designers, engineers, web developers, marketers, and technologists. One question raised at the Roundtable on Entrepreneurship Education (REE) earlier this month was this: How can we manage this human resource to build more and better founder teams at universities?
Among the student population, MBAs are a key resource for fledgling student companies. MBA students are older and more experienced than their peers on other degrees. Some have started businesses before, or worked at large organisations. In general, compared to many other would-be student-entrepreneurs, MBAs are more worldly, and better trained in the art of making money.
However, few MBAs ever get involved with startups. This problem was highlighted at REE by both Business School faculty and external participants. Business schools are ranked based on the post-graduation salaries of their alumni; thus, a business school that sends its students directly to high-ranking management positions outranks a school that promotes entrepreneurial MBAs. (Unless your MBAs found a company like Groupon. Hey, there are always exceptions.)
In addition, MBA students are offered little opportunity to build social capital—i.e. to build strong personal and professional networks—while they study. Their programmes only last one year, so they have little time to integrate into the local business and startup communities. And if they come from outwith the Euro zone—as many MBA students do—it is difficult to obtain permission to stay in Scotland to work. That means MBAs have even less incentive to devote themselves to small, risky companies.
What’s the upshot of all this? The most experienced, business-savvy group of students on campus is largely absent from the bulk of student startup activity, and we can be almost certain that this negatively impacts both the scale of student ventures and their overall success rate.
Bottom line: Although MBAs have particularly valuable skills and experience, significant structural hurdles mean that they remain largely inaccessible to student startups.
You may laugh, but in my experience most MBA students are risk averse. Old enough to be trapped by commitments, but without the financial freedom of much later life. Most (especially Scottish tech) startups offer a 90% chance of failure, while being funded by little more than obsession. Tough sell, even for people that might find it interesting work… and there aren’t many of those, because generally the people with the motivation to go out and start a business do so, while formal education is more likely to attract people who need it to develop within larger established businesses.
Now that’s not the whole story. There are a fair few “Road to Damascus” moments, where people discover things about themselves they didn’t know at the outset. Those are probably the easiest people to lever into the startup scene. But timing is everything.
However, that still leaves the familiar barrier: The “3 guys in a garage” (with apologies for the gender reference) mentality that constrains most Scottish startups. Not necessarily in the individuals, but certainly in the wider support mechanisms. Edinburgh simply doesn’t scale up the way (especially) Silicon Valley does. And since it doesn’t scale up, you’re never going to need the kind of management expertise that’s helpful to get from big to huge… Catch 22?
Hey Tim, I take your point that not all MBAs will be up for the risk involved with building a new startup. It’s well established how difficult it is to be successful with a new venture—and that’s true everywhere; not just in Scotland.
I don’t think that’s the point though—some MBAs are entrepreneurial. The problem raised at REE was that Business Schools have little incentive to promote/support such entrepreneurial MBAs because it does nothing for their rankings. And even if an entrepreneurial MBA comes along, they’re offered little opportunity to stay in the U.K. if they’re from outside Europe.
Startups lose on both fronts: few entrepreneurial MBAs, and little opportunity to engage with them over the long-term.
I think that’s the real catch-22. Business Schools would have to process an awful lot of entrepreneurial MBAs before they saw much of a payout (because succeeding with a startup is so hard). But until there’s a clear payout, the incentives of the Business School and needs of startups will be misaligned.
I agree with Tims comments.
I would also question whether MBAs really are “The most experienced, business-savvy group of students on campus”, or at least whether the nature of their experience and “savvy” is that relevant. I suspect the campus you choose to look at plays a big role in this – not all campuses select or attract the same type of people for MBAs.
You could also argue that the analytical ability prized in larger organisations and by MBA schools (just look at GMAT) tends to dictate against the fundamentally irrational act of building a startup… Although perhaps I’m back to violently agreeing with Tim here.
Hi Ian,
I can’t think of any other group of students on campus who collectively have more real-world experience thinking about markets, industries, margins, business models, etc.
So I guess my point here is the same as above: if startups want to hit the bigtime, they need to think about all of these things, and think about them early. MBAs are the most obvious source of this kind of expertise on campus, but structural barriers provide little incentive for Business Schools to recruit entrepreneurial students.
Ultimately, student startups lose out.