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FEBRUARY 21, 2000


What Entrepreneurs Can't Learn in Business School

Words of wisdom from venture capitalist Ann Winblad: A Q&A

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Not so long ago, business-school grads headed straight for investment banks and consultancies, with nary a look elsewhere. Their degrees were tickets to prestigious, high-paying jobs. Increasingly, MBA programs are seen as training and networking grounds for would-be entrepreneurs. But how well-prepared are MBAs for the pressures of running a company -- especially in the high-tech arena? And how much do academic credentials impress venture capitalists, such as Ann Winblad, co-founder of Hummer Winblad Venture Partners, whose firm has helped launch more than 70 startups? Business Week Online reporter Mica Schneider spoke to Winblad recently about how MBAs stack up as entrepreneurs, as part of an extended interview on this and related topics (See Part 1, "Ann Winblad on Women in the New Workplace," Business Week Online, Feb. 18, 2000). An edited transcript follows:

Q: Over the past academic year, business schools have watched many of their prize MBAs flock to jobs in private equity or pursue entrepreneurial ventures -- an anomaly compared with years past. To a partner in a venture-capital firm, does an MBA carry extra weight when an entrepreneur comes in seeking funding?

A:
When starting a company, the real emphasis is: What's the leadership team, and who is the CEO? The MBA itself isn't enough. We ask, "Is this [venture] something that is a goal line for them, or are they just trying it out for a while? Had they been gearing up to start this company or to be a part of this company [during school]?" We have funded teams where everyone has been a freshly minted MBA, and we couldn't find a CEO in the midst and had to bring someone else in.

We can coach a Courtney Rosen [CEO of eHow.com, a how-to information site] to become an extraordinary CEO, even though she has had limited management experience, and has never run a company before, although she does have an MBA. With other people -- and it's [based on] our gut [feeling] -- they are going to have a challenge recruiting. Or they won't be strong enough to make rapid-fire decisions, or to keep bigger strategic milestones in place. Maybe they won't be able to hold up to their constituency or their competitors in the marketplace -- and that really cannot be measured, despite the MBA.

Q: What does that say about the two-year MBA programs -- are they too theoretical?

A:
The intense competitive dynamics of an emerging-growth industry are not taught at the business schools. They are hinted at when entrepreneurs come into the classroom and say: "Here's what I did, here's how I won." That's great, but it's more like pep rallies than the science of claiming your space on the market map.

It's asking a lot to expect an MBA student to come out having an understanding of Internet architecture. Yet when I went to school as an undergraduate business major, I had to take computer-architecture classes. Now, it's assumed the MBAs will come out of the schools and hire people that have this knowledge. The MBAs that get funded are dependent upon their board members to have an overarching view on the technology landscape, as well.

The other thing that is very challenging is recruiting in a competitive marketplace. We've moved to industries where the ability to manage and understand the interpersonal dynamics of your intellectual-capital employee base is instrumental in building a long-lasting company. And that is only covered superficially [at business schools].

During employee crises, we see the more established CEOs as superior recruiters. In a good majority of startup companies with a first-time CEO, there is the "palace revolt," where co-workers begin to think the CEO should be replaced -- which is ridiculous. It happens at least once for every company. And the onus falls on [the venture capitalist] to pitch in, help out, and bolster the CEO to not surrender to the palace.

You're asking a tremendous amount from an MBA to lead a company. They have to learn on the job.

Q: If you had your druthers, what would MBA curriculums include?

A:
The schools would better define the summer between students' first and second years. Some students have an enormous awakening [as a first-year intern] as to what will be expected of them as a leader in industry. Others are not in an environment where they are adding to their MBA skills.

Another thing is public speaking. The MBAs are going to be spokespeople for their companies: to employees, investors, public markets, the press, and there is a high likelihood they will be on national television if the company achieves any [public notice]. We send many of our CEOs to speaking coaches. Given how the media works today, it's shocking that communication skills aren't part of the MBA programs. So [the venture capitalists] do it, and we bring them to a venue where we can see how they do as a captain of industry in a public forum. They need those skills to recruit people, money, to have a successful IPO, and to reach of millions of people on the world stage.



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