The Value of an MBA and Startup Success: Is a Degree Necessary to Succeed?

The relationship between MBAs and startups is complicated at best. While it is true that the value of an MBA is highly contested when it comes to its correlation to startup success, many individuals interested in developing their own startup are turn to MBA programs to gain specific insight and skills. Here’s why.

Entrepreneurship training and the MBA

The value of an MBA is immediately evidenced in the extensive training that graduates are nearly always guaranteed to have undergone. One of the most important things that an MBA program can offer an individual interested in startups is entrepreneurship training. John Fjeld, PhD, professor of the practice of strategy and executive director of the Center for Entrepreneurship and Innovation at Duke University’s Fuqua School of Business, lists the following as some of the specific entrepreneurial skills that an MBA student will attain during the course of their MBA program:

• A structure for evaluating the viability of a startup idea and a framework for building a strategy for the venture
• The principles of market research and how to apply them in a startup environment
• Sources of capital and how to build a financing plan
• Product management and marketing
• Financial accounting
• Team building, leadership and other organizational issues

Most importantly, the MBA program – specifically the entrepreneurship specialization track, if one is offered by the school – often allows students to experience hands-on and experiential learning that will prepare a graduate to handle the real challenges of founding and operating a startup. “Success in a startup requires a good business idea and good planning and execution. The planning and execution require a variety of skills and experience,” says Dr. Fjeld. “The MBA is the educational program specifically designed to impart the necessary skills and also to give students the opportunity to gain important experience while in the MBA program.”

Brain Guido Hassin, an alumnus of IMD Business School and founder and CEO of Smart Office Energy Solutions, currently teaches entrepreneurship at Rice University, and he echoes Fjeld’s emphasis on experience. “The techniques and heuristics that expert entrepreneurs use to run startups are very different than those learned by MBAs pouring over case studies,” says Hassin. “Entrepreneurship skills, like leadership skills, cannot be read in a book or learned passively in a classroom lecture...that’s why in the entrepreneurship course I now teach at Rice University, we have students develop businesses, not business plans.”

Startup success: how does an MBA fit in?

For those still questioning the value of an MBA to startups, rest assured that the ways in which an MBA can contribute to startup success are extensive and explain the continuing interest in MBAs from budding entrepreneurs. As Hassin testifies, “I am a vastly more effective entrepreneur and startup leader than I was before.” Furthermore, in addition to benefitting the startup that an individual is interested in developing, or that the individual already has in the works, an MBA can be extremely helpful for those looking to join preexisting startups.

“For the startup I joined immediately after my MBA, I began in product management,” says Hassin. “It turned out, however, that our greatest needs weren’t in product; they were in developing an organization and supply chain that could keep up with our rapid growth. After a deep analysis with the CEO of our startup's risks and opportunities (during a flight to Taipei to meet with suppliers), I became the head of global operations, which was of much greater value to the company. This would not have been possible without my MBA as my pre-MBA startups were pure software ventures.”

The MBA network benefit

Even more importantly, an MBA program provides the unparalleled opportunity to join an MBA network.

“An MBA graduates with an entire class of peers who are well positioned within many industries and geographic locations,” says Hassin. “Whether the MBA entrepreneur needs advice, introductions, or even investment capital, his or her network is incredibly valuable. In the two startups I have been with since my MBA program, I have relied extensively on my MBA network for introductions to manufacturers, introductions to customers, industry- and geography-specific advice, and investment capital. In fact, I was pleased and honored when I announced my current startup's first round of angel funding and we received investment not only from classmates but also from my former professors!”

Dr. Fjeld notes graduates of the Fuqua MBA program have gone on to start their own startups in fields ranging from fashion to technology – including companies like Hukkster (started by Katie Finnegan) and Thundershirt (started by Jay Mebane, Chris Ng Cashin, and Ben Feldman) – which serves to prove that the value of an MBA in startups is not to be underestimated.

A final incentive? “Many of the most influential people for an entrepreneur –investors, clients, partners – have MBAs as well,” says Hassin. “An MBA entrepreneur is able to speak the same language with them and instill confidence that the venture is in good hands.”