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Tue Feb 19, 2013, 11:28 PM

An MBA: The founderís recipe for failure

So you think an MBA arms you with the skills needed to launch a successful company?

Think again. The degree might actually make you risk averse and cripple your ability to innovate.

In a recent article for Quartz, I wrote about how MBA programs are not designed to help students become better entrepreneurs. However, when MBA graduates decide to go out on their own, I found that they have the same failure rate as non-MBAs. I talked to professors, angel investors and venture capitalists, and none sees a correlation between a startupís success and the founders having an MBA. Collectively, they have dealt with more than 300 such companies over the last 20 years.

While there have been recent MBA startup successes like BirchBox (Harvard) and Warby Parker (Wharton), the founders of these companies were already high-achieving individuals who got into top programs and probably could have succeeded without their MBAs. In an article by Reuters, career services departments at major MBA programs reported that in 2011, nearly 5% of the graduating class started a company right after graduation. Taking just Harvard and Wharton, which each graduate 800 MBAs every year, that means about 80 startups were founded in 2011, from which only one of two have become standout companies (i.e. the BirchBoxes and Warby Parkers). The overall failure rate is about 90% for all startups. (In venture capital terms, a failure is when the startup fails to produce a positive return on investment for the fund.)

ďIím not sure it is the MBA degree that matters positively or negatively for startup success. But I do think the expectation of what that degree should bring is what creates a lot of cultural and performance problems with MBAís and startups,Ē says David Stern, a prominent VC at Clearstone Ventures. One of the common concerns voiced by startups who have MBA founders is that they are book smart and detailed, but lack the ability to change and adjust quickly in a fluid market.

Innovation is hard. Yet, itís the only thing that will allow you to create a truly unique company that can have staying power. Looking at the past for innovation is a mistake. Yet, MBA schools and large corporations tell us to do this all the time. There are hundreds of startups that had great teams, huge funding, but could not identify the right product to build because they did not move fast enough in terms of identifying the right innovation for their particular market. Maybe they should have skipped the MBA and gotten right to work.


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Reply An MBA: The founderís recipe for failure (Original post)
Renew Deal Feb 2013 OP
Leslie Valley Feb 2013 #1
TM99 Feb 2013 #2

Response to Renew Deal (Original post)

Tue Feb 19, 2013, 11:53 PM

1. Bill Gates is a college dropout


George W Bush has an MBA From Harvard.

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Response to Renew Deal (Original post)

Wed Feb 20, 2013, 02:04 AM

2. Odd article really


An MBA is a masters level degree focused on general business administration. It was always designed to train highly educated managers who understood clearly all aspects of how a business is run from the economics to business law to corporate finance. Very few individuals who do an MBA plan to become business owners or entrepreneurs. Instead, they plan to become better managers on the corporate ladder. So why would this author be surprised that most MBA's who do attempt to start a business would have the same failure or success rates as someone without an MBA?

Many MBA's will offer an option to concentrate in a specific topic, and there are MBA's which specifically focus on entrepreneurship. What is the success rate for those graduates when compared to the general population? That would be a more pertinent study and conclusions drawn.

I was already a entrepreneur and had started a small business in my early 20's. Getting an MBA in my 30's simply made sense. Even then, I concentrated in economics because that was my personal interest. If my business were to grow, then the education I got would be applicable in hiring specialists in various departments. I am not a lawyer, however, I understand enough business law to converse with one knowledgeably. I am not a finance manager, however, I can converse intelligently with one were the need to arise. I am not a marketing director, but I am quite capable of doing advertising and understand how to do a marketing campaign.

Not everyone is an innovator. In fact, most people in the business world are not. Even with my own business I am not really an 'innovator'. An MBA may assist someone with the specifics of running business if and only if they are truly an innovator, but no one should get an MBA believing it will make them an instant entrepreneur. If that is what they are now teaching, then it is bullshit and needs to stop. The author is an MBA himself, but what really is his point? Don't do an MBA if you want to run a business and be an innovator? Is he an innovator with his own business? Don't try and be an innovator if you already have an MBA? Yet, he has one? Is this just another article knocking higher education and encouraging people to believe that if they just think they are innovator then they will be?

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