I like being a contrarian. As a kid, if a certain TV show was popular amongst my buddies, I’d purposefully ignore that show and search for other shows that were less well known (e.g., Hogan's Heroes was a personal favorite that never hit mainstream). When someone declares something is conventional wisdom, I look to poke holes and challenge the underlying assumptions.
Recently, the conventional wisdom in Startup Land has been that young, technical founders are the prototype for creating valuable companies. The formula, this theory goes, is to find a hacker in a hoodie and bring out the wheelbarrow of cash to back them. Think Mark Zuckerberg/Facebook, Drew Houston/Dropbox, David Karp/Tumblr and – the most recent poster boy darlings of Startup Land – the SnapChat founders.
I have always thought that stereotype was skewed. Don’t get me wrong – I love young founders. At Flybridge, we have invested in many of them (e.g., Eliot Buchanan and Dan Choi at Plastiq) and we plan to continue investing in many others. But in my twenty years living in Startup Land, I have found that there is no single model or archetype for success. Success comes in many flavors and combinations. And, in my last five years on the HBS faculty, I have become more convinced of the value of the MBA entrepreneur.
Thus, I was thrilled to read Aileen Lee’s terrific analysis of unicorns (companies that have been created in the last 10 years worth more than $1 billion) and have it shatter this piece of conventional wisdom. Aileen systematically analyzed the common characteristics behind this cohort of 39 companies and found that “inexperienced, twentysomething founders were an outlier. Companies with well-educated, thirtysomething co-founders who have history together have built the most successes.”
Aileen’s analysis didn’t provide any data on the role of MBAs in the unicorns. So, in partnership with HBS second year Juan Leung Li, we did some of our own digging. Here's what we learned:
- 33% of the Unicorns had at least one founding member who had an MBA. Examples include Kayak (Steve Hafner/Kellogg), Workday (Aneel Bhusri/Stanford and Dave Duffield/Cornell), Yelp (Jeremy Stoppelman/HBS) and Zynga (Mark Pincus/HBS).
- 82% of Aileen's Unicorns had at least one founding member or current executive team member with an MBA. Examples of unicorns where MBAs were hired to help build the company include Evernote (COO Ken Gullicksen/Stanford), Facebook (COO Sheryl Sandberg/HBS), Twitter (COO Ali Rowghani/Stanford).
- Of those that had MBAs, the leading schools represented were: HBS (21%), Stanford's GSB (17%) and Wharton (10%).
This week, John Byrne of Poets & Quants published a complimentary analysis, ranking the top 100 MBA Start-Ups. In this analysis, he found some terrific companies that have been MBA founded in the last 5 years, such as Okta, Rent the Runway, Warby Parker and Wildfire. Among this MBA founder list, HBS (34%), Stanford (32%) and MIT (11%) came out on top.
Why all the momentum with MBAs and start ups? Simply put, the major schools have radically changed their curriculum. These schools and others have become super-focused on training their MBAs to be effective executives across a range of company sizes, from start-ups to large enterprises. For example, HBS now teaches two courses to help train students to be effective start-up executives: Launching Technology Ventures (which I teach) and Product Management 101. MIT is considering offering their own version of these classes in the spring or next year and Stanford has a plethora of strong course offerings for future start-up executives.
So the next time someone tells you that you need a hoodie to be a great start up entrepreneur, don't be afraid to flash your MBA diploma with pride.
To see the detailed spreadsheet that Juan Leung Li did, click here.
SEEING BOTH SIDES 
Great to see this perspective being developed and clarified. I teach MBAs at IESE and see some wonderful entrepreneurs. The challenge in MBA teams is to limit to those that really need to be there, and not a group of friends “because we are friends”.
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Interesting stats… However, most of billionaires do not have MBAs, and I would be happy to see the column ‘Founders only’… They hire executives with MBA only because many good executives have MBAs… but most of GREAT entrepreneurs don’t. By the way, good book on the topic:
http://www.amazon.com/gp/produ…
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Many MBAs have technical educations and experiences prior to going back to school (engineers, MDs, researchers). Someone with both the technical and business expertise and the network from a top MBA school seems to be a recipe for a pretty good startup founder.
P.S. Some MBAs wear hoodies too.
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I do not think putting executive with mba’s joining a post series a /b companies that’s already making millions in revenue or has 1m+ users and turning that into a billion dollar companies is what most people in the valley consider startup.
sheryl sandberg? c’mon. 99% of the risk was already taken. the spam emails. the hacking. all of that which led to viral growth was already done before her. what mba’s lack is knowing how to execute in a startup that is on a shoes string budget and doesn’t have top caliber employees. and in a real startup, execution is everything.
if you ask the question are mba’s from top schools better suited to “manage” startup companies that have already proven themselves in terms of product-market fit, cracked chicken and egg, etc etc, I would have to agree with you. most hackers/startup people may be creative, hustlers, great product makers, brilliant developers, or just lucky, but often times, not good managers. mba’s provide the relevant and great toolkit to implement best practices.
however, founder/ceo of billion dollar companies. the numbers are shockingly few out of thousands that come out every year that are very intelligent guys with top notch pedigree and a rolodex that extends across the globe. that’s because (this is coming from a private equity guy/former m&a guy who is now in a startup, from the beginning, and have friends friend from every top mba school), mba program do not really teach you what’s needed to do well in a startup. i’m not talking about business plans and monetization models. i’m talking about the 5,000 issues to get the startup up and running before you even launch the product.
case study methods like hbs are modestly helpful at best but very bad to get mba’s ready for the startup life from the ground up; that’s because the valley just like any other markets are fairly efficient – what’s worked before 12-24months ago would probably not work now (especially marketing). plus when you talk about billion dollar companies, it tends to be industry or sub-industry disrupters; and in those cases, a lot of shady risks and actions have to be taken prior to these MBA executive joining a “startup” (what i’d call a “fast growing corporation) to make that initial ooommph happen. “fake it till you make it” is something most mba’s have no clue how to do. a promoter at a club is probably better equipped than an MBA.
uber – illegal business
airbnb – illegal business
lyft/sidecar – illegal business
twitter – is this a feature or a real business?
groupon – every b-school student would point out lack of barriers to entry and negative roi proposition for small business owners when it was gaining traction.
dropbox – the things mba’s would have done like ppc would have resulted in no success. mba’s network wouldn’t have helped because you needed access to the hacker community who had access to reddit and HN and digg that got this company off the ground.
my pe background would have told me to never work on uber, airbnb, etsy, groupon. most common question my mba friends ask any startup is, “why can’t X a 10x larger company just do that. that seems like a stupid idea” as soon as you ask me or any other real startup that question, i know that person has no idea how the startup world works – the bureacracy of even a 100 person “startup / fast growing corporation” the lack of “vision” the need to integrate to same “playbook” — none of those things MBAs really get. all I do then is just point to why didn’t poke work for fb? why is fb offering 4bn when they created a superior, more secure product and they have 1bn users and a warchest?
also, the institutionalize setting where in which MBA student think alike and together even though they’ve never really been in the real world executing is a problem. what they think happens on the other side vs the =excel formula* 20% growth that somehow magically occurs is a huge disconnect for some of the most accomplished mba students.
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I asked the same thing about % of students entering & leaving MBA programs to pursue entrepreneurship, and the reality is most people don’t start their own business until much later into their careers, thus making those numbers somewhat skewed.
I think the trend of a growing interest in entrepreneurship (in business schools or not) is the culmination of many factors, including the recent recession, technology, social trends, etc… and things like crowdfunding and crowdsourcing are making it easier for individuals to access resources they couldn’t before. Just my 2 cents.
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This is encouraging to see, especially I as I am in the last year of my MBA with the goal of launching my ‘own thing’ before or shortly after I graduate. Seeing as I’m no unicorn (as much as I’d like to think I am), these are definitely good facts to keep in my back pocket.
BTW, why are there never any studies about entrepreneurship at Canadian schools? At least there are conversations starting about it http://business.financialpost….
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We’re having a lively debate about your post over on the /r/Startups sub-Reddit. Your input would be valuable: http://www.reddit.com/r/startu…
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Thanks for pointing me to it, Joshua.
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Why hasn’t anyone mentioned anything regarding the network you gain from attending these ivy league MBA programs. The MBA degree itself is borderline worthless. A majority of it is who you know.
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Hi, interesting post and study. Did you account for the point in time they got their MBA’s? Ie. before, after, or during their time with the Start-Up? Cheers
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Hi AP – We did not look at that. Good suggestion.
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Great post Jeff! And very timely given Poets & Quants recent issue on a similar topic. Given recent discussion around the the role of women and other minorities in tech (see recent Wired article entitled “Silicon Valley isn’t a Meritocracy” by Alice Marwick) – I wonder if a next step might be looking at the presence or lack thereof of underprivileged groups and whether the MBA provides a step-up for the same in tech.
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I see the purpose of the comment – but for me it is not about MBA’s.
It may be about “non-hoodie specific traits”
self-discipline (sports, education, upbringing and others)
it may be about experience
work-experience, having felt-the-pain, discrimination (triumph through adversity)
it may be about generalism
(a bit of finance, IT, sales, hard work etc)
it may be about self-actualisation
(I made it in the conventional word – now I’m going to break the mold)
it may be about communication and society
(blogs, socialises, volunteers, represents)
Or, as I suspect, it may be about an unusual mix of the above that someone finds fascinating. Glue these together into a strongly annealed team and aim at a big problem and magic can happen.
But wearing hoodies – An irrelevance as sure as it is a fashion.
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Why is Tesla not included?
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As you’ll see in the comments of Aileen’s Techcrunch post, there has been a lot of dispute about the companies she chose as “unicorns” and whether she missed any. I decided not to wage into that debate but rather just use the companies she listed as emblematic.
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Stoppelman at Yelp dropped out of the MBA, as did Jason Goldberg of Fab. It’s arguable whether they should count as MBAs (would you call a law school dropout a JD?).
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Fair point, Chris. I didn’t know about Goldberg and I debated back and forth about Stoppelman. I ultimately decided to include him because he clearly was an “MBA type” founder by dint of the fact that he started Yelp while at HBS.
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Adding current exec and founder confusing things a bit. Starting a company from nothing and growing it to something that turns into a business is one set of skills while running an organization and setting strategy as the company and marketplace matures is very different. One requires skills and experience gained from a MBA (or real world experience equivalent) while the other requires a great idea, tenacity, vision, belief, a lot of crazy hard work and probably the most significant ingredient, a very high tolerance for personal financial risk..
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You are right and I intended to make that point clear in my blog post and in the analysis. Thanks for expanding on the point. Perhaps I should have labeled the first column simply “founder”, which was the defining feature of the companies in that column, as all of them had executives + founders with MBAs, not just executives with MBAs (which was the 2nd column). Sorry for any confusion.
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Nice analysis, thank you for posting. However, not sure if this is true: “Why all the momentum with MBAs and start ups? Simply put, the major schools have radically changed their curriculum.”
I remember doing an analysis of Stanford GSB’s ’04 and ’05 class and roughly the same % of students entering the program listed as “entrepreneurs” left the program.
Even if stats have changed since then is it possible that alternate employment choices seem less alluring to MBAs than before? The traditional consulting and finance tracks are not particularly hot now. Or could it be the cost of launching a startup is lower than in years past encouraging more tech entrepreneurship by MBAs? Either way not sure curriculum is driving factor but certainly can help.
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Good points, Arjun. I do think you’re right that alternative employment doesn’t seem as alluring, but there is no question in my mind that the MBA curriculum (whether due to forces of push, pull or both) are now more entrepreneurially oriented than ever before.
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That’s pretty interesting-thanks for sharing. I had not seen Aileen’s piece but makes conceptual sense. Always nice to challenge conventional wisdom with fact!
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Thanks for posting this interesting analysis. One thing I want to point out is that MIT is not considering offering their own versions of those HBS e-ship classes next year. MIT has had these classes and many more for decades now. The course listing of classes ongoing just this semester is here -https://entrepreneurship.mit.e…
HBS has great success in e-ship but I don’t think it’s a causal relationship (HBS students are just top notch). One huge differentiating plus about e-ship at MIT is that many of the classes and labs mix both MBA students and engineering / science / architecture students from across campus. I don’t think you get that cross-pollination that’s critical to novel tech ventures anywhere else. Even Stanford has two separate e-ship centers.
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Thanks for the clarification, Tom. I know that MIT is considering offering a start-up product management class to its students as I’ve been in dialog with the administration and student leaders about it. MIT is considering adding this course to its already rich set of offerings, which you point out. I didn’t mean to imply otherwise.
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Jeff, interesting post. I’d offer a couple of observations, though. First, the education landscape is changing rapidly and profoundly. So looking far into the rear-view mirror may not, as our IPO prospectuses say, be a good predictor of the future. The cost of an MBA keeps escalating and the ease with which anyone can access alternative resources is growing. I’m not an expert on YCombinator, but it sure seems like they can give someone in three months a really great roadmap for learning — on a just in time basis — what they might learn in an expensive MBA program. Going forward, the real question is how much more effective a young adult will be with an MBA versus with the best alternative use of those two years and the associated costs.
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Ted – I agree with you, there are alternative programs arising that provide great educational background for young adults to learn business and entrepreneurship skills. I expect in 10 years we will see a significant number that are alumni of YCombinator, Techstars, etc.
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Just a note. You can’t really say that you’re more likely to succeed being a set of 30-somethings who have worked together vs. a kid in a hoodie with the data you’ve presented here. It seems no one did an analysis of all the unsuccesful (or non-unicorn) businesses started by these two groups.
So yes, there may be more 30s duos in unicorns that hoodie kids, but what % of 30s duos succeed vs hoodie kids. My guess is that fewer hoodie kids start businesses but don’t know if it’s enough to tip in their favor.
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Good point, Peter. There may indeed be a sample bias here.
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Have you guys isolated the value brought by the MBAs at those companies by function and stage?
I think the question is not how many MBAs can be found at Unicorns, but how many MBAs have created Unicorns in proportion to the rest of the population and what was their role.
Top MBA networks are well embedded in the funding and executive ranks of many companies. It makes sense for a growing startup to pick out a top MBA to do sales or fundraising for them, but in early stages when the direction of idea and the execution of the idea matter most, those skills may not be as relevant.
The MBA bias comes at the founding and early stage level (aka at Accelerators/Seed). In fact, in early stages an MBA is considered a risk, because those founders have options and may be more tempted to quit when the going gets tough and the cash gets low (6 figure loans, 6 figure opportunity cost of salary etc). Later-stage startups (which have already proven their business model) have plenty of cash and reasons to hire MBAs. To make a difference in perceptions, show how early stage startups benefit from MBAs as well.
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Good point, Diana. With 33% of the founders having MBAs, it’s pretty clear that MBAs are highly valuable at the early stages. I didn’t do a more extensive analysis on when the executives get hired around the founders, but it is a good question. My own experience is that it is very case dependent and that certain MBA types can be very valuable even at the very earliest stages, particularly in product management and business development.
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Really interesting post. Thanks for providing your input data, too!
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this is frankly the best comment on here. i can speak from direct experience (3 time founder, first time CEO funded by top VC).
Founding companies, really founding companies and going through the pain, thrills, upsets, wins, pivots and overall hustle fundamentally flies in the face of the very reason these folks go and get an MBA. This role is simply not in their risk profile, and the company likely won’t be until its institutionally funded.
Its not authentic at all to try to attach an MBA to what a true founder does.
Doesn’t mean that MBA’s can’t add huge value, and drive scale – they can and do – they are just not suited to founding.
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