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MANAGEMENT

11.20.98  
A Newly Minted — and Indebted — MBA Eschews Corporate Life for a Startup
Alexander Kleiner tells Business Week Online why entrepreneurship is hot at B-schools

If you thought the point of spending tens of thousands of dollars on an MBA was to buy a shortcut to the corner office of a Fortune 500 company, consider this: One of the hottest areas of business-school education is entrepreneurship. In 1970, only 16 business schools offered classes in starting an enterprise. Today, more than 500 profess to do so -- and 100 B-schools have entrepreneurship specialties. To that, add entrepreneurship centers, startup incubators, and business plan competitions. The upshot: More MBAs are taking the entrepreneurial route. Among the 1998 graduating class at Stanford School of Business, for example, 28% work at small companies or run their own businesses.

What's the motivation -- given the prospect of poverty and grueling work -- to attend B-school? Business Week Frontier Online's Nadav Enbar interviewed one starry-eyed entrepreneur, 31-year-old Alexander F. Kleiner III, to find out. A 1998 graduate of Massachusetts Institute of Technology's Sloan School of Management, Kleiner went straight from commencement into the throes of startup life. His company, Frictionless Commerce Inc., makes software that helps Internet shoppers compare products. Kleiner didn't even participate in the corporate courtship ritual that B-schools orchestrate to assure their graduates jobs. He's heavily in debt. Moreover, he won't recover the $200,000 in tuition and foregone income that he invested in his MBA anytime soon. Here's an edited transcript of Kleiner's thoughts on his plunge into risk:

Q: Is there a specific psychology behind being an entrepreneur?
A:
Absolutely. I don't know how you would label it -- some kind of a psychosis. The way I think about it is, you really have to disassociate yourself from the traditional, rational way of thinking. As an example, I didn't look for a job during my second year of business school, because I knew I wanted to start my own company. The rational thing to do would have been to diversify and see what all my options were. But I just didn't want to get caught up in any kind of a path of least resistance. So I didn't even get my résumé together.

Q: Are you leveraged to the hilt trying to make your dream come true?
A:
I've described my financial situation to people and seen the blood drain from their faces. When I quit my job at Banker's Trust to go through a $50,000 business-school program, I managed to live off of savings. But now I've racked up tens of thousands of dollars of consumer debt in just the few months since I graduated in June. Not to mention, I've cancelled my pension at Banker's Trust. I also have a 2-year-old child, my landlord died, and I was evicted from my home, and my wife is an adjunct lecturer earning a low salary. My outlook is: If I don't try this now, I'll always look back and wonder, "What if?"

Q: Does the prospect of an economic downturn in the coming months, as the market continues to oscillate, have you thinking about cashing out for a job that offers more security?
A:
Not at all.

Q: Aren't you afraid of venture-capital funding opportunities drying up?
A:
No. At this point in the company's life cycle, it's mostly coming from the heart. With the team and the market opportunity and the idea, it just seemed like the right thing to do. In my mind, once I start thinking about how many weeks of cash we have, or how long I'll try this, or what will happen if certain external factors in the economy occurred, then I think it'll probably be time to start looking for something else to do -- because I just won't have the same risk tolerance.

Q: Do you feel that you needed to earn an MBA to do what you're doing now? Has it really made a difference for you in angling Frictionless Commerce toward profitability?
A:
That's a subtle question, because I think it's absolutely made a difference in my case. But I don't think [a degree] is a necessary condition. I think you can certainly do this without an MBA.

Q: What do you feel are the biggest benefits of earning that MBA in the context of your startup?
A:
People would be surprised, but the best lesson I got out of MIT Sloan is sales and networking. Being part of the MIT community is the kind of thing that you just can't buy or you can't read about in the library. It's something to experience. And I think the personal network is amazing: It helps you out in ways that you don't expect over and over again.

Q: Has the Sloan network played a large role in garnering your company funding? Or putting people in touch with others for new ideas for other companies?
A:
Oh, all of the above. Our first two customers were generated through direct contacts from the entrepreneurship center -- [either] the institution or the people who have worked there. Having that connection is key to a new company.

Q: You previously mentioned the MIT community where there's a give and take of ideas, funding, and possible partnerships. Can you elaborate?
A:
One of the reasons that I chose to do this business is because of the people and the team that I've been working with for close to a year. We share the same ideals. We're trying to create something out of nothing. I can't play the saxophone, but I would love to. I can't sing worth a damn, [but] I'd love to. I'm not tall enough to play hoops.... This is the way that I can be creative.

Q: Looking to the future, how do you plan to use Sloan as your ally throughout your company's life cycle?
A:
I guess the word "plan" makes it sound a little nefarious. You just think of it as being part of a family or part of a relationship. You keep in contact as you move along, and you grow together. Ideally, what is meaningful to me is being able to hire people and to feel like I've had a hand in creating jobs.

Q: Has your optimism grown since you started Frictionless Commerce?
A:
I've definitely grown and matured as a person. This experience accelerates time like you wouldn't believe. I've had jobs in a previous life -- five years of banking and a couple of years of consulting work -- where months would go by and the landscape hardly changed. For me, [running a startup] has always been a lot of fun. As soon as we started paying payroll, that's when a lot of the stress came in, because then I started worrying about supporting other people. So far, however, I'm not jaded. My optimism hasn't been tempered yet.

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