Why an MBA is conducive to launching a startup — Max Faingezicht

Why an MBA is conducive to launching a startup

A lot of discussion in the media recently has focused on whether or not entrepreneurs should spend valuable time and money pursuing an MBA degree versus gaining experience on the front lines of a startup. Some commentators such as Vivek Wadhwa even insist that an MBA subtracts from a candidate’s value.

Shortly after earning an MBA from MIT Sloan School of Management, I co-founded a startup called ThriveHive (http://thrivehive.com ), which offers a guided marketing solution for small business owners. I met my co-founder Adam Blake, a fellow Sloan MBA candidate, in an entrepreneurial-focused course at the School. While neither of us believes an MBA can transform someone into an entrepreneur, earning an MBA provides a great framework for tackling the uncertainties that inevitably occur at a startup. Here’s why:

Tools for Thriving amongst ‘Structured Chaos’ 

A startup is a completely different animal from a small corporation. Think of it as a machine still being assembled while it’s already running. Startups are places where striking the right balance between process and execution ultimately determines one’s probability of survival.

In essence, it’s structured chaos.

Some critics may thus conclude that a classic MBA doesn’t prepare students for this type of environment. But many MBA programs have evolved to include  a data-driven approach and sharper focus on entrepreneurship, technology and innovation, all of which better prepare first-time entrepreneurs to thrive amongst this ‘structured chaos’.

Like most startups today, ThriveHive follows the ‘Lean Startup’ movement. I believe this is where data-driven MBAs offer startups an edge. Being able to measure, learn and iterate is a critical process. Fellow data-driven MBA alumni are typically comfortable around numbers and enjoy setting up experiments while keeping the objectives of creating value and building a sustainable business in mind.

Nearly half of the classes I enrolled in at MIT Sloan revolved around founding new ventures and their associated challenges. These included everything from understanding term-sheets and the financing of fundraising all the way to entrepreneurial strategy. At a startup, you’re making critical decisions with incomplete information multiple times a day. And each and every one of these decisions can make or break your business. At the same time you are building a team and motivating them through ups and downs, while balancing your short-term and long-term goals to ensure you will have the necessary funding to stay afloat. Here, the leadership, finance and communication classes play an important role as you work your way through these daily challenges.

And when entrepreneurs raise money, they’re dealing with venture capitalists that look at multiple deals every day. So the entrepreneur is at a clear disadvantage. I don’t think I would have the same level of understanding of term-sheets and early stage deals I do today if I hadn’t been sitting in those classes, running through the simulations and crunching the numbers myself.

An internship, too, is another opportunity to complement your learning experience. In my case, I interned at Amazon with their Kindle software division, which allowed me first-hand experience working on product management and an opportunity to transition back into software.

Another big factor to consider are clubs and extra-curricular activities that often bring together business people, investors, engineers, and other diverse players. It is within these cohorts that most people interested in startups meet and decide to turn an idea into action. For example, the MIT $100K Entrepreneurship Competition, which announced its newest winner last night, has facilitated the birth of more than 160 companies, which have gone on to raise $1.3 billion in venture capital and build $16 billion in market cap.

A business school schedule has some flexibility as well, which creates space for ideas to develop, evolve and morph into better versions. This is a reason why so many MBAs start companies during school or right after graduation.

The Network

As we build out our startups, our cohort of entrepreneurs from MIT Sloan’s Class of 2011 has remained close. While many of us are spread out across Boston, San Francisco, New York and beyond, the relationships we have developed and the sense of support that exists remains strong. Everyone continues to provide introductions and guidance.

If we look at the numbers, MIT Sloan, Stanford GSB, and Harvard Business School awarded more than 5,000 MBA degrees from 2010 to 2012. According to data made available every year on business schools’ admissions reports, we discovered that over 400 MBA graduates went on to start their own companies (plus many others who joined startups). founders from MIT Sloan’s class of 2011 have collectively raised more than $20M in venture (and crowdfunding) financing over the past year and half since our graduation.  These companies include, among others:

Another advantage has been staying close to Sloan geographically since this has allowed us to tap into an amazing set of resources ranging from professors, entrepreneurs in residence, students, clubs and classes all the way to accessing conferences and events like the Big Data Conference. Our early investors, too, included at least five individuals with ties to MIT.

MBA to Startup: There is hope

When an entrepreneurial individual seeks an MBA, it doesn’t affect their drive or will to change the world.  It’s simply a way to access an ecosystem flowing with creativity, smart people from all over the world, and a strong faculty that facilitates hands-on learning and discussion. The experience helps explore, socialize, and evolve ideas. It also provides the connections, frameworks and, hopefully, a team of like-minded individuals who are crazy enough to jump onto the irrational path of entrepreneurship where everything is uncertain and changing the world is the only option.

Max Faingezicht, MIT Sloan MBA ’11, is co-founder of ThriveHive. 

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