Top MBAs for Founding Startups, Raising Billions in Venture Capital

This counts for much in early-stage investing, where idea and opportunity often trumps financials. Many investors base their decisions on the charisma of a founder and their potential. Interpersonal relationships, which are better nurtured in person, are essential to the fundraising process.

Since 2006, Stanford has produced more than three times (800 in total) as many founders as the Stern School of Business in New York, and those Stanford MBAs have banked more than five times more venture capital (US$18.3 billion total), according to PitchBook, although there are other reasons for the disparity. 

MBA programs have long been very good at nurturing strong networks; that is a key selling point of the degree, which comes with a price tag of upwards of US$100,000 at a top-flight school like Stanford. The ‘network effect’ is one thing MBA programs in the PitchBook ranking have in common. 

It helps, of course, that many of the top-ranked schools have the largest cohorts. Harvard, which enrols 900 MBAs each year (as per its latest cohort), has a clear advantage over smaller schools in connecting its graduates with an investor network. 

Matthew Prince, founder and CEO of cybersecurity business CloudFlare, says the network was among the most valued aspects of his MBA at Harvard. Since founding CloudFlare with classmate Michelle Zatlyn in 2009, the company has grown to have 500 employees, over US$100 million in annual revenue and a purported valuation of over US$3 billion – and it is gearing up for an IPO. 

“The network is very valuable, although that is a cliché,” Prince says. “Our first investor was a Harvard graduate who trusted us and related to us because he could call our professors, who could vouch for us. 

“As we get closer to being a public company, the value is still there. Many of the people we went to business school with are now investment bankers and we have leveraged that network.” 

Another thing helping students raise money for their companies is the fact that many business schools have investment funds or affiliations with local venture capitalists. For instance, at Michigan Ross, the Wolverine Venture Fund is run by 30 MBA students who have US$7 million in assets under management to invest in companies set up by Michigan alumni, and others. 

Although such funds often invest in companies outside their school network, access to both investing and mentoring, which many funds provide, likely has an impact on the number of students that launch successful companies. 

These investment funds form part of a broader network of support which business schools are dolling out in response to more of their MBAs founding startups, rather than working at Fortune 500 companies. 

A recently-published survey of MBA alumni by The Financial Times found that nearly one-quarter of MBAs at 50 top-ranked business schools had created startups within three years of graduation. At Stanford and MIT Sloan, more than one-third of MBAs had founded companies.