Frontier Home Business Week Home Contact Us Business Week Archives


For an Entrepreneurial Edge, Go to B-School?
An MBA sure is expensive, but many grads say the skills, experience — and network — you get are worth it

When Scott Kucirek left the U.S. Navy a few years ago, he wanted to do one thing really badly -- start his own company. A helicopter pilot, he had plenty of guts. But Kucirek was short on managerial skills and business contacts.

So he enrolled at the University of California at Berkeley's Haas School of Business with the goal of founding and launching his first startup by graduation.

Now a second-year MBA student, 33-year-old Kucirek and classmate Juan Mini are forming an Internet real estate brokerage, zipRealty Inc., with an eye to a July launch. They could never have gotten so far so fast without B-school nurturing, Kucirek insists. He hashed over the idea in class. Fellow students did hours of market research for free. The Haas School's business incubator, which this year lent computers and office space to six student ventures, has kept costs to a minimum. Best, the Haas name gave Kucirek and Mini entrée to a prominent Silicon Valley lawyer -- now a company adviser -- who offered to help them find venture capital when they were ready. "Networking is everything," says Kucirek. "There's a huge network of Haas entrepreneurs, and they help you learn faster."

Such sentiments are driving the hottest area in B-school these days. To satisfy student demand, the University of Chicago's Graduate School of Business increased openings in its entrepreneurship courses by nearly 40% -- to more than 1,200 last year. At Harvard business school, 90% of the Class of 1998 took at least one course in starting a business. Since 1995, Northwestern's Kellogg Graduate School of Management has boosted faculty at the school's eight-year-old entrepreneurship program to 13, from 3. And New Product and Venture Development is the fastest-growing managerial track at Massachusetts Institute of Technology's Sloan School of Management. "At orientation, when I ask the incoming class how many would like to start their own company, almost all 350 hands go up," says Ilse Evans, director of Sloan's career development office. "Today, the issue isn't whether students will, but when."

What's driving them? The astounding success of such high-tech entrepreneurs as Bill Gates, Michael Dell, and Palm Computing Inc. founders Donna Dubinsky and Jeff Hawkins. Or perhaps it's the lure of striking it rich from an Internet initial public offering. Still, the price would-be entrepreneurs pay for this two-year crash course is daunting -- considering people have learned how to start businesses by "just doing it" since commerce began. Annual private or out-of-state tuition at Business Week's Top 25 B-schools now averages $22,600.

B-schools are sensitive to the money issue: It's one reason why many are pouring so much into such features as incubators and school venture-capital funds, which get students' businesses off the ground before they leave the nest. "It's worth more than $130,000," says Kucirek of his education. That figure includes tuition, living expenses, money he put into the business, and two years of foregone income.

Even B-school administrators admit that no academic program can teach you what it's like to hire and fire people, weather cash crunches, and manage an employee-benefits package. What's the real virtue of such programs? They help students avoid costly but common pitfalls of startups, B-school defenders say. "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 run their businesses profitably off the bat -- that certainly is well worth the investment," contends Thomas E. Moore, dean of Babson College's F.W. Olin Graduate School of Business. The Babson Park (Mass.) school is a pioneer in entrepreneurial training.

Not everyone is convinced. "It's one thing to learn about business. But it's another to conduct it," says Lance Chastain, who founded his company, Interex Inc., a computer peripherals and accessories manufacturer, at 19. Sixteen years later, his business employs more than 100 people and has over 50 million customers. He attributes his success to on-the-ground experience -- for example, developing his supply chain with manufacturers in Asia. "You just can't learn that in a book," he maintains.

REAL-WORLD KNOWHOW. B-schools are getting better at marrying theory with hands-on learning. Increasingly, they use entrepreneurs and venture capitalists to inject real-world insight into classwork. Harvard, which claims to have offered the first course in 1947 on running one's own venture, has updated its vaunted case-study curriculum to include some 26 examples fresh from Silicon Valley. At Babson, where 8 of 21 faculty members have founded companies, all first-year students work as consultants for local companies. To earn an entrepreneurship certificate at Haas, a student must spend a summer as an intern at a young company and help develop a new venture.

Many top MBA programs offer business plan competitions, where students with compelling ideas vie to win cash and other resources to turn their concepts into real companies. One of the best known, Massachusetts Institute of Technology's $50K Entrepreneurship Competition, has spawned 35 companies in its 10-year history. Over three months, teams of students submit business plans repeatedly to a panel of angel investors, venture capitalists, and businesspeople, who eliminate contestants during each round. Three winners split $50,000 in cash and receive business services.

Alexander Kleiner III, a 1998 Sloan grad who entered (but didn't win) the contest, used it to get free feedback for the idea behind the company he launched after graduation, Frictionless Commerce, which makes software to help Internet shoppers compare products. "Going through the competition really gave me a risk-free environment to practice, do a lot of market analysis, strategizing, and grunt work that I don't have time for now," he explains. The University of Arizona's Eller Graduate School of Management considers such efforts so valuable that it requires all its entrepreneurship students to enter the school's competition.

Babson, University of Michigan Business School, and Columbia Business School -- to name a few -- have established venture-capital funds in recent years to invest in student startups, a potentially lucrative move for the institutions. Founded in 1996, Columbia's Eugene Lang Entrepreneurial Initiative Fund has invested $250,000 in each of two promising student companies. "We put students in front of experienced entrepreneurs and capitalists for the purpose of vetting student ideas and telling them where the ideas make sense and where they don't," says Murray Low, an associate professor and entrepreneurship program director at the school.

INCUBATORS. The University of Texas at Austin, Berkeley, and Babson take a different tack -- sponsoring incubators to jump-start student-run ventures. Haas's Kucirek says the school's incubator has a professional atmosphere, which lends credibility. He pays almost nothing for his three computers, rent, telephone, and Internet connections. And, the students swap lore. "I now know, for example, which is the best law firm and where to get the best deal on business cards," says Kucirek.

As eager as they are to promote their entrepreneurial programs, one thing few B-schools stress is how many graduates start their own companies. The available figures suggest a mixed record. At Berkeley, 150 of 240 second-year students enrolled in at least one entrepreneurship course in 1998. But, says Laura Tyler, director of the school's career management services, "There are probably about 10 students graduating this year who are truly starting their own businesses." At Stanford -- in Silicon Valley, where startup fever runs high -- a mere 5% of the Class of 1998 founded companies.

The picture changes over time. At Carnegie Mellon, 30% to 40% of grads start their own businesses five years after graduation. And more than 33% of Harvard's alumni end up running their own companies 20 years after graduation.

Some schools encourage newly minted MBAs to wait. Says Tom O'Malia, director of USC Marshall's Greif Center for Entrepreneurial Studies: "We encourage our students to take jobs where they can learn on somebody's nickel, assuring a greater chance of success when they embark on their venture."

The financial incentives are compelling: After two years without an income and student loans to pay back, it's hard to reject a lucrative corporate offer for the penury of an entrepreneur's first years. A Harvard B-school graduate's average compensation package was $163,800 last year, for example. With many big companies looking for enterprising types to launch aggressive little ventures, the options are less clear-cut.

Wherever grads end up, entrepreneurship programs have a growing fan club. Even skeptics admit that the alumni networks that come with an MBA are golden. "Ten to 15 years ago," says Columbia's Low, "we didn't know how to [teach entrepreneurship]. Now, classroom experience is being combined with pursuing real ventures. That makes a difference." It's becoming gospel to people who want a fast track to becoming their own boss.

By Nadav Enbar in New York

TABLE: What Top B-Schools Offer Entrepreneurs


TABLE: What Top B-Schools Offer Entrepreneurs

Who Needs An MBA Anyway?

This Generation Is All Business

Can "Extrapreneurship" Become a Buzzword?

You Don't Need an MBA to Network on the Net

A Newly Minted — and Indebted MBA Eschews Corporate Life for a Startup


Business Week Home Bloomberg L.P.
Copyright 1999, Bloomberg L.P.
Terms of Use   Privacy Policy

Bloomberg L.P.