How An MBA Can Help You Do A Startup

The conventional wisdom about MBAs and entrepreneurship is why bother? The two years you need to invest in a top-flight MBA program, not to mention the $150,000 to $200,000 in tuition, fees and other expenses, could just as easily be go into your startup idea. You'd not only have a headstart on your company, you also would have the money to get it off the ground.

At least that's what most of the critics say. They believe that true entrepreneurs have no reason whatsoever to get MBA degrees.

They're wrong--dead wrong.

Entrepreneurship at most business schools is booming and there are very good reasons for it. A strong MBA program can help a would-be entrepreneur unlock your idea, do smartly what you love, gain crucial skills to shift the odds of success in your favor, develop new ideas, and to know how to measure success.

MBA entreprepreneurs get crucial guidance and support from highly motivated and intelligent people. They also find in their classmates like-minded partners and co-founders who bring much value to a startup, not to mention direct access to serial entrepreneurs who as permanent faculty or executives-in-residence are eager to mentor young people through the process. And finally most schools today have formal programs that often provide seed capital to get a company up and running before you use the school's alumni network for more capital or customers.

Surveys of MBA graduates show that the vast majority believe their education was vital to the success of their startups. Nine out of ten believe that an MBA helped them lead their companies, grow their businesses and develop their ideas. Some 86% of MBA entrepreneurs feel that their education helped them develop financial projections for their businesses and 81% thought that an MBA helped them write a more compelling business plan.

Just listen to Adam Healey (in above photo with his wife Christin). Having already launched one startup that blew up in the dot-com bust, Healey decided to get an MBA from the University of Virginia’s Darden School to specifically help him launch another company. After gaining his MBA, he spent a year in management consulting before leaving to start a global hotel search engine in 2006. One of the first things he did was to return to Darden as an alum to take advantage of the business school’s resources and alumni network to incubate his business.

“Elite business schools like Darden provide the ultimate safety net to hedging risk when starting a business,” adds Healey, who has since sold his business and started with his wife, Christin, yet another company, Borrowed & Blue, a destination wedding website. “You have one to two years of runway with covered expenses. To date, attending UVA and leveraging its resources to build and grow companies is one of the smartest moves that I have made.”

Or ask Daniel Wolchonok who will graduate from the Yale School of Management this spring. After stints at Microsoft and Pricewaterhouse Coopers, he went to Yale determined to come out with a company of his own. "I had a difficult time making the level of impact that I desired in my job and wanted to have strategic influence as opposed to merely taking orders from above," he says. "Entrepreneurship was the perfect vehicle for me to experience all of the above."

But how did an MBA help him develop and launch his idea? He got seed money for his company, Prepwork.com, from the Yale Entrepreneurial Initiative along with a personal grant for his own living expenses. "The funding that I got from Yale was sufficient for me to get my business off the ground in its initial stages," adds Dan. "Another thing about Yale’s Entrepreneurial Institute is that they do not take any of the equity in your business for themselves, unlike most of the well-known incubator programs out there. I also got free office space and was paired with several mentors from the Yale network.

"One of my mentors is a Yale alum who founded a company that went public within its first year. Another is the CEO of a company that secured a seven-figure venture capital award. The curriculum of the YEI in based largely around Lean Startup methodology. It was there that I learned to talk with customers early on, to validate my idea, and to speak freely about the solution that I was looking to develop."

There's more. "Another big benefit was free legal services from Yale lawyers," continues Dan. "One of the services that I appreciated most was the training and consulting that I received about partnership agreements. Everything from how to structure the agreement, to splitting up equity, to exit and succession planning and formulating a vesting schedule for equity was a part of that training—all for free."

Not a bad way to start a company, if you ask me.

To learn more about MBA entrepreneurs, see our new series MBA Startups written by Lawrence Cole at Poets&Quants:

MBA Startups: A Yale MBA Wants To Call His Own Shots

MBA Startups: A Darden MBA Returns To School To Start A New Company

MBA Startups: Why A McCombs MBA Turned Down J&J To Do Her Own Thing

MBA Startups: Taking The Entrepreneurial Route at Kellogg