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3.22.99  
Who Needs an MBA to Start a Company, Anyway?
Babson College's Thomas Moore defends academic entrepreneurship

Does an MBA give entrepreneurs legitimacy they can't get by just going out and starting a company? You might think so after viewing the exploding number of students studying the subject at business schools.

It's the hot new area at MBA programs across the U.S. In 1970, only 16 programs offered classes in starting a business. Today, 500 do, and 100 actually let you specialize in entrepreneurship. Moreover, B-schools are increasing their budgets by as much as 30% annually to fund entrepreneurship centers, start-up incubators, business plan competitions, and seed capital funds. Some programs spend nearly $2.1 million on such adjuncts to their curricula.

Is entrepreneurship merely a passing fad, fueled by Internet IPO mania? Are MBAs deluding themselves that costly B-schools can actually teach them how to be successful entrepreneurs? Here, Business Week Online's Nadav Enbar talks to a veteran of entrepreneurial education -- Thomas E. Moore, dean of Babson College's F.W. Olin Graduate School of Business about the topic. Babson, located in Babson Park, Mass., has been grappling with the topic for over 30 years. The school recently created a $200,000 seed fund to finance start-ups, expanded its incubator to house five to six new ventures, and initiated a $500,000 entrepreneurship scholarship program. Here's an edited transcript of their conversation:

Q: Why is entrepreneurship so hot in B-school?

A: Entrepreneurship is really more than just business start-ups and high-growth small businesses. Big companies are looking for people with an entrepreneurial mindset. So when schools like Babson focus on entrepreneurship, it doesn't mean all of our grads are going to end up in start-ups and small, high-growth businesses. We have recruiters at companies like Kellogg who've said we're a preferred supplier because our graduates manage their 80-year-old brands as if they were start-up businesses.

Q: But why should I pay $50,000 in tuition and forgo two years in the workforce to study entrepreneurship at Babson when people have been effectively learning the ropes on their own for eons?

A: One, we don't make entrepreneurs at Babson. We help them become better at what they intend to do. Most of today's successful entrepreneurs that you read about -- the Bill Gateses are the exceptions -- fail five, six, seven times before they've succeeded. Providing people the tools and teaching them the techniques to identify opportunities, launch new businesses, develop business plans, access capital in ways they haven't thought of, and run their businesses profitably off the bat --- that certainly is well worth the investment.

Q: How does Babson impart the entrepreneurial skills to its students?

A: The whole first year of the program is driven by an entrepreneurial model. How do you assess business opportunity? How do you develop a business plan? How do you sell the idea? How do you bring the opportunity together with the right people and the right resources to create value?

After the first year, I think all of our students...have an entrepreneurial mindset. In the second year, we offer students a host of electives that range from courses in basic entrepreneurship -- where they put together a business plan and learn how to sell it -- to courses on entrepreneurial finance and entrepreneurial marketing. They also touch upon issues about managing fast-growth businesses and managing the family business.

Q: That coursework makes the Babson MBA experience worth the cost?

A: Absolutely. Failure can be very expensive. I met with a guy yesterday whose large, California family business invested in him and [in] his brother to kick off a new venture. They lost multimillion dollars...He came to Babson to understand how to better manage his failing business.

He said to me, "You know, this education is worth millions to me. I now realize that I've lost millions trying to start a business without really understanding the dynamics."

[Also], a lot of our students are going to work with companies with less than 25 employees, high-growth start-ups. Their starting salaries, in many cases, are as good or better than those going to work for the big Fortune 500 companies.

Q: What's the hottest aspect of the entrepreneurship program?

A: Taking an idea right through to execution....[Students] develop a business plan for a real business. We then have business-plan competitions. And, for those who win the competitions, we provide free incubator space, replete with telephones, fax machines, and computers to help start the business. Right now, we have six companies that are being launched in our incubator. This year, we're going to be investing $200,000 to give initial funding to a series of those businesses. We have alumni who are offering free building space to grads angling to start their own ventures. We also have faculty that are giving them advice.

Q: Of the elements you've just described, which provides the greatest advantage?

A: Helping people develop the business tools and techniques to be successful, and the alumni network. And our faculty play a critical role in that because they are all active entrepreneurs themselves and make many connections.

Q: Five years out, does an entrepreneurial MBA still retain a significant advantage over a competitor who did not earn his MBA stripes?

A: We're collecting information on that right now. There's very little data for me to support my hypothesis, but I think so. I think we all tend to look at the exceptions...the Bill Gateses. But we really need to look at a broader sample. I think the jury is still out. How do you compare Paul Fireman [President of Reebok Ltd.], who drops out of college and launches a very successful business, to the people who come to Babson, learn the tools and techniques of an MBA, and then go out and create businesses?

Q: At the top of our conversation, you mentioned how, over the past five or ten years, entrepreneurship content has really bulked up. So obviously business schools are looking at this as the next big trend in education.

A: Yeah. And that's an interesting point. The big guys...have for years not paid much attention to entrepreneurship -- they've only looked at the big corporate point of view. There have been recent studies that say the next decade is going to be the decade of the entrepreneur. Big corporations are desperately seeking people who are entrepreneurially minded. So now, the big [B-school] boys are jumping on board. You have to wonder whether entrepreneurship is going to go the way of "total quality management" or...a lot of other management trends in some of the big schools. But for some schools -- like us -- it's just clearly at the heart and soul of what we do.

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