A good friend recently called me to discuss his desire to get an MBA. This entrepreneur, turned venture capitalist, raised the question about whether an MBA really adds value for an entrepreneur. One of his non-MBA entrepreneur friends had recently criticized the MBA, saying that it actually provided negative value to true entrepreneurs.
This isn't a new debate and is something I've had to discuss quite a few times over the last couple years. As I discuss this topic, I will be drawing from personal experiences I had as an MBA student (class of 2011) and as a two-time internet entrepreneur.
Arguments against an MBA:
1. Getting an MBA kills creativity:
Some argue that the mere act of attending business school kills your creativity. I understand the argument, as there is certain truth that the more you learn the more cautious and cynical you can become. I also know that there is a certain herd mentality at top business schools that tends to push people towards consulting and banking. Lastly, there is some truth that MBAs can suffer from analysis paralysis, although I'm not sure if there is actually causality.
That said, while at Wharton, I surrounded myself with entrepreneurs, and I can say with confidence that I've never been around a more innovative and creative group set of individuals. One class I took during my first year in school was an Innovation class where 50 students were required to come up with 10 business ideas. Over the course of the class, the 500 business ideas were presented and eliminated until only 5 remained. What an incredible opportunity this was to force ourselves to be creative and to expose ourselves to the creative ideas of others.
Business school is a risk free training ground that exposes students to hundreds, if not thousands, of new businesses and business models that have both succeeded and failed. I am not a believer that exposure to new ideas and knowledge make one less creative.
2. Engineers a plus, MBA's a minus
I've heard this from Guy Kawasaki and Aaron Patzer (founder of Mint.com). Both have said something to the extent that every engineer in a business adds $500k in value and every MBA reduces value by $250k. While this certainly gets crowds laughing, I would be shocked if they actually believe this. Of course there is tremendous value in having engineers and technical co-founders in some businesses, but there are many more businesses that rely more heavily on their founder's charisma, drive, vision and ability to motivate and lead than on their ability to code.
Earlier this year, my co-founder and I, both non-engineering MBA's (from Harvard and Wharton, respectively), raised several million dollars for a pre-revenue business. Our investors include some of the most prominent VC's and angels in the US and in Brazil. All of them have invested heavily in MBA entrepreneurs ... one of the VC's has made ten investments this year, with eight of the founders/CEO's coming from Wharton (4) or Harvard (4). Not surprisingly, venture capitalists value business education, many of them holding MBA's themselves.
3. The cost of an MBA is too high. A true entrepreneur would take that money and use it to launch his/her own business.
I'm the first to admit that the cost of an MBA is astronomical. That said, there is a logical fallacy in this argument. Most people finance their MBA's so they don't actually have a couple hundred thousand dollars in the bank to begin with. Secondly, there is a strong argument to be made that the entrepreneur would be better off going to school, as he/she will likely make better decisions regarding which business to start and how to strategically execute on their idea.
Before business school, my business partner and I founded e-commerce business. We successfully grew the company to become the largest business in its space, but our market was frustratingly small. We ended up applying to business school and were both fortunate to be accepted into our top choices of MBA programs, and we had to make the decision about whether to invest further into our business or to step away and go back to school. Ultimately, we decided to invest in ourselves, rather than our business. This choice has changed the trajectory of our professional careers, as we ended up launching a business that will likely generate more revenues than the industry of our previous business.
Every major investment in a business is evaluated by ROI. Business leaders don't make decisions simply based on total cost (advertising expenses or employee salaries, for example). The ROI for each MBA graduate is quite different, but I strongly believe that entrepreneurs have an
abnormally high ROI from their educational investment.
Ultimately, the value of education goes well beyond a simple net present value calculation. There is value in becoming a more well-rounded individual, in increasing your knowledge, and exposing yourself to new ideas, thought processes and people.
4. Entrepreneurs don't need MBA's.
This is absolutely true, and frankly, it's true for every other individual in an MBA program, entrepreneur or not. The reason students go back to school to get their MBA is because they believe that they can improve their career trajectory with the degree. MBA-entrepreneurs are no exception. We believe that an MBA will help us better operate our businesses, that it will help us increase valuations, simplify fund raising and attract better talent.
5. The founders of Apple and Microsoft didn't have MBA's.
Yes, this argument is true (and also overused). These same founders also happen to be college dropouts. I'm not sure this means a whole lot for you and me. Many incredibly successful entrepreneurs do have MBA's. In fact, 50% of Harvard MBA's are in an entrepreneurial role within 15 years of graduation. Furthering your understanding of business principles, studying factors that have influenced business successes and failures, and becoming part of incredible networks of business influencers will only help you as an entrepreneur.
How to get the most out of your MBA, if you're an entrepreneur:
1. Start early
Start the idea generation process before you even start school. Once you've been admitted, commit yourself to the task of generating and writing down new business ideas. The more ideas you can generate, the higher likelihood there is that one of those ideas will stick. If possible, try to do this with someone (a friend, co-founder, family member). In my first year in b-school, my business partner and I generated ~60 ideas that we felt were good enough to include on a running list that we shared with each other on a Google spreadsheet.
2. Get involved in your schools entrepreneurial community
Surround yourself with other entrepreneurs as often as you can. Most schools have entrepreneurship clubs that have regular activities, mixers and lectures. Participate in your school's business plan competition. Take entrepreneurial classes where you will meet other entrepreneurial types. Spend your free time meeting with other entrepreneurs to talk formally or informally about business ideas. Talk to professors who have helped entrepreneurs in the past.
I was fortunate enough to be admitted into Wharton's business incubator, the Venture Initiation Program, during my first year in business school. I spent several hours of every day sitting in a large bullpen with dozens of other entrepreneurs working on our business ideas. I was able to draw inspiration from my classmates, take advantage of mentoring offered to the students and even received several cash awards from the program to help me get my business off the ground.
Business school is a perfect place to learn how to network, to master your team skills and to develop leadership. You will be surrounded by highly ambitious and driven individuals who will inspire you and drive you to dream big. Make sure to take full advantage of the resources your school has developed to support entrepreneurs and their ventures.
While in school, I took a number of classes that impacted me greatly, even as an experienced entrepreneur. These classes help entrepreneurs avoid making costly mistakes, help them identify additional opportunities and prepare them to create large and lasting businesses.
So much of an entrepreneur's life is determined by timing, so I understand that an MBA isn't for every entrepreneur. An MBA isn't going to create entrepreneurs, but business schools do act as idea incubators that can nurture and stimulate the innate abilities of potential entrepreneurs. I didn't discover my passion for entrepreneurship until I was in my mid 20's, and I saw many of my classmates "discover" entrepreneurship while in business school. If you are a current or aspiring entrepreneur considering an MBA, I'd encourage you to follow your gut, because ultimately that is what every great entrepreneur does.