MBA.co.za

Should MBAs rethink their idea of entrepreneurship?

by Nick Harland
By revising their understanding of entrepreneurship, MBA students could find new and increased value in the discipline.
  • Interest in entrepreneurship among MBA students remains comparatively low - both as a standalone skill and as a career path.
  • But an MBA gives students a unique blend of tools that make MBA-founded startups more successful than the average business.
  • Recognising entrepreneurship as a life skill as well as a career path can become a prime reason to study an MBA.
There’s a disparity between the ambitions and outcomes of MBA students.

While around one-third of MBA students go to business school to develop their entrepreneurial skills, less than 5 percent of MBA graduates go on to start a business.

Such a big drop-off is understandable. After all, while between 60 and 90 percent of startups fail, post-MBA career paths such as finance or consulting offer high starting salaries and a rapid return on investment, making them consistently attractive fields - especially for business school graduates with debt to repay.

But that may be overlooking the fact that, in many ways, an MBA is the perfect launchpad for a business. Further, entrepreneurship teaches you vital skills that will benefit you in your future career, whatever you pursue. Let’s take a closer look.

Entrepreneurship rates among MBA graduates remain low…

Developing entrepreneurial skills remains a low priority for prospective MBA students. In the most recent GMAC Alumni Perspectives Survey, it was the eighth most popular motivation out of the 10 cited by students. Factors like salary, international employment, and accelerated career progression led students’ reasons for pursuing graduate business education.

It’s also hard to dispel the strong association that MBA programmes have with consulting and finance. They are overwhelmingly the industries of choice for graduates, and that has been the case for many years.

Yet in a climate where consulting firms are delaying the hiring of MBAs and freezing starting salaries, the industry doesn’t offer the guarantees for MBA graduates that it once did. And for those who do choose the path of entrepreneurship, MBA-founded startups actually have a better chance of success than most others.

…but MBA startups tend to be more successful than most

Despite its relatively low popularity as a career path, entrepreneurship can be a fruitful venture for MBA graduates.

Research from the Financial Times in 2016 found that 86 percent of MBA startups were still in existence three years after launching. That’s significantly higher than the average survival rate, which is typically placed anywhere between 10 and 40 percent.

And that’s not all. In 2023, MBA alumni raised more startup capital than ever before. The expedited grocery delivery company Gorillas was founded by alumni of INSEAD Business School and raised more than 1.3 billion USD in 2023. Along with fintech company SoFi, founded by alumni from Stanford University’s Graduate School of Business, it is one of two MBA-founded startups to have reached the fabled “unicorn” status in recent years.

So what exactly makes an MBA program such fertile ground for startups?

How an MBA supports entrepreneurship

It represents a safety net for entrepreneurs

Perhaps one of the biggest reasons that entrepreneurial ambitions are rarely followed through after graduation is the lack of a safety net. Launching a startup instead of getting a full-time job is always going to be a big risk for students.

However, according to Doug Villhard, academic director for entrepreneurship at Washington University's Olin Business School, your time at b-school is the perfect time to pursue a business idea. “It's much, much easier to workshop a business in school than it is while working a 40-hour job,” he says.

“Statistically, 90 percent of startups fail. Working on one while earning an MBA gives you a great fallback plan, if nothing else. Much better, in my opinion, than just quitting your job and going for broke. You can test the idea while earning your MBA and hedge your bets.”

It provides unique access to thriving ecosystems

But an MBA is more than just a fallback option for aspiring entrepreneurs. The programme itself offers benefits for entrepreneurs that you simply couldn’t access otherwise. One of an MBA’s key differentials is the network, which Villhard says goes way beyond the four walls of business school.

“At Olin (and most schools), we have five ecosystems,” he explains. “One within your course, within your classmates, within the campus, within the city, and within our alumni network on the coasts and around the world. Students need all five.”

The question of where you choose to study your MBA is especially important when it comes to entrepreneurship. Olin Business School, among AACSB’s 1,019 accredited schools, is based in St. Louis, which PitchBook recently ranked as one of the top 20 startup cities in the world. This means the city is able to attract more guest speakers, organise more events, and offer more internships to students. And the value of that kind of ecosystem for the business school? “It certainly helps,” smiles Villhard.

Another city to feature on that ranking was Berlin. The Germany capital has long been known as a startup hotspot, and the city’s chief business school is taking full advantage of that reputation.

“As Berlin’s startup ecosystem is one of the largest in Europe, it offers great access to resources and opportunities for entrepreneurs,” says Rebecca Loades, who is the director of MBA programs at ESMT Berlin. “It’s crucial for entrepreneurs to have access to investors, partners, and top-notch talent.”

Students at ESMT Berlin get unique access to Berlin’s startup ecosystem. The school’s in-house incubator, Vali Berlin, brings together investors and founders with MBA students. Meanwhile, the school’s Summer Entrepreneurship Programme “helps participants develop their own startup ideas by helping them find co-founders, identify trends and problems, find and build solutions, and pitch to Venture Capitalists and business angels,” according to Loades.

“All of this benefits your career as an entrepreneur,” she says.

It teaches skills that organisations highly value

Yet perhaps we’re overlooking something here; studying entrepreneurship doesn’t necessarily mean you have to start a business. In truth, entrepreneurship is a life skill - and one that would be valuable to any organisation.

Loades says that the significance of entrepreneurship “transcends immediate financial gains.” Through entrepreneurship, students also learn how to innovate, how to adopt new business models, and how to respond quickly to market challenges.

Given the range of skills you can gain through entrepreneurship, Villhard believes it may be time to rethink our idea of what it actually entails, as well as its value to businesses. At Olin, students often apply the entrepreneurial skills they gained during their programme to roles within larger organisations.

“Society tends to think of entrepreneurship just as starting companies, but it is really a mindset that teaches one to continually look for innovation and promote change within any organisation,” says Villhard.

Which perhaps illustrates the true value of entrepreneurship. It is no longer just a niche career path, but a core component of every MBA program. It may be time to make entrepreneurship a core component of your skill set, too.

Useful resources:
AACSB Insights
AACSB Insights publishes perspectives from leading voices in global business education, the latest business school data and insights, and views on the current and future state of business.
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