The Start-Ups Coming Out of US Business Schools

Business schools are increasingly becoming breeding grounds for start-ups. More universities are providing resources and putting structures in place to help MBA students, and others on campus, interested in embarking on a journey with a new venture.

It is one of the reasons why we have taken entrepreneurship into account in the QS Global MBA Rankings 2018.

More students are coming to campus with dreams of start-up stardom. Many experts attribute this to the achievements of Silicon Valley giants, such as Facebook and Google. These kinds of companies have long been media darlings. But at least two educators attributed the growing interest in entrepreneurship programs to the popularity of the reality TV show Shark Tank.

However, some of the top business schools in the United States are trying to give students a more realistic perspective. Stanford Graduate School of Business encourages its students to mull over business ideas in b-school but launch post graduation.

Different philosophies on teaching entrepreneurship

While students can make their own decision, educators at Stanford feel you cannot get the most out of a program if you’re pursuing a new venture, says Deborah Whitman, director of the Center for Entrepreneurial Studies (CES) at Stanford University. About 15% of a class over the last several years has been in the process of starting a business while in school, adds Whitman. And the school offers 60 courses related to entrepreneurship and innovation. 

Columbia Business School (CBS) embeds students in a New York accelerator to give them a taste of the early days of a start-up. The school also asks entrepreneurs who have failed to speak with students. The point is to expose them to the realities they will face and make an educated decision, says Vincent Ponzo, managing director of the Eugene Lang Entrepreneurship Center at CBS.

“We make sure students know how difficult entrepreneurship is,” says Ponzo. “We give them programs, where they get their hands dirty. Many come out and say, ‘It’s not for me.’”

Taking the long view

At Harvard Business School (HBS), educators refrain from getting hung up on timelines. In other words, they are less concerned with helping students start businesses while at school. Close to 50% of HBS alumni launch a new venture within 15 years of graduation, says Jodi Gernon, director of the Arthur Rock Center for Entrepreneurship at HBS.

“Business schools are great for aspiring entrepreneurs,” says Gernon. “They teach you how to scale. It’s easy to start a new business today. But it’s not easy to grow one.”

Indeed, business schools contend that the best service they offer those interested in being their own boss is teaching them how to be a boss in the first place. The alumni knee-deep in the start-up life agree.

Starting a business in b-school

Kelsey Doorey went to UCLA Anderson School of Business with no intention of starting a business. But she was tired of buying bridesmaid’s dresses for friends’ weddings. Another student encouraged her, so she wrote a business plan for what is now Vow to Be Chic, an idea for renting dresses to bridesmaids in the way suits and tuxedos are rented to groomsmen.

Then, she continued to work on the start-up throughout the MBA program. She used it for her second-year thesis project and took the idea to a business plan competition. She was offered funding from venture capitalists on the spot. But she had already lined up a full-time post-graduation job in New York, where she had interned.

When Doorey called the CEO of her expected employer, he told her to take the money and pursue her dream. He’s become a mentor. And Doorey raised $9 million in funding, owns 13,000 dresses to rent to bridal parties across the US and employs a team of stylists who can help customers online or in the San Diego office and pop-up shops on various tours. Doorey estimates her business has saved women $5 million.

“I think business school is amazing, especially when you take the idea and work on it at school,” says Doorey. “You can apply the principles of almost every class in your business.” In addition, Doorey has a professor who serves as an advisor to the company, and the school introduced her to Susan Feldman from One Kings Lane. Classmates helped work on the business as part of teams on projects for different classes. They also served as focus groups because they happened to be the target market for dress rentals. 

A built-in network

In fact, fellow classmates are among the greatest assets gained at business school, say entrepreneurs. Theo Lee and his friend Michael Kim planned their Korean food business while at UCLA Anderson. “We want to bring Korean flavors to America,” says Lee. They invited classmates to a launch party when the company, KPOP Foods went live on Kickstarter. Originally, Kickstarter advised the team of five to seek funding elsewhere because food products rarely ever did well on the site.

But they went ahead with the plan anyway. Their friends hit social media and kept sharing their video. KPOP reached its goal of $10,000 in the first eight hours of the campaign. In addition, they used their business for projects in classes throughout business school to get feedback from professors and fellow students, which was “incredible,” says Lee. The company has a Korean hot sauce on the market already.

Sometimes, professors or the school itself make a financial investment in the business. Many schools also have accelerators or incubators on campus. Northwestern University’s Kellogg School of Management offers some students in the earliest phase of entrepreneurship $1,000 to test ideas. Then, they offer those who make it to launch $5,000 to work on the business.

Finally, in the competitive Zell Fellows program, Kellogg provides 10 students in new ventures $10,000, travel experiences, networking opportunities, alumni mentors, and more, to pursue the business. In the five years since launching, Zell Fellows program has 44 ventures in the healthcare and new venture tracks that are still active. In addition, the start-ups have raised $33,000,000 in funding and awards.

Everyone is an entrepreneur

What is interesting about Kellogg and most business schools is a shift to mainstreaming entrepreneurship. Once a niche inside MBA programs, entrepreneurship is now integrated into much of the curriculum. The schools are trying to teach the mindset and frameworks to all their students, even those who are not planning to start their business.

In fact, Linda Darragh, the Larry Levy executive director of the Kellogg Innovation and Entrepreneurship Initiative, says the school also has mini corporation labs, where big companies, such as Tyson or P&G, talk about innovation with students. Next, the executives outline problems they are facing and have student teams offer solutions within an hour and a half or so. The idea is for students to recognize the needs of these companies and for the companies to see the entrepreneurial mindsets of potential hires firsthand.

One obvious trend at a number of business schools is a desire to commercialize technology already on campus. More than ever, universities are trying to match business students with those in the on-campus engineering, medical, and other schools. Kellogg has an experiential course just for having students make market assessments of existing technology created by those in other parts of the university.

When raw technology meets innovative business

This idea is practically a religion at MIT Sloan. “Our president wants an innovation orchard,” says Trish Cotter, associate managing director at the Martin Trust Center for MIT Entrepreneurship. Sharing the abundance of resources and making connections between the different treasures of the school is a goal of the faculty, says Cotter.

“We can walk out our door to venture capital, big companies, start-ups, and Noble Prize winners,” she adds.

While some used to argue that business schools couldn’t teach entrepreneurship, few can deny the available resources on campus or the usefulness of core courses. But that’s not the only driving force in this start-up frenzy on campuses across the US. Millennials are also demanding such changes at business school.

“This generation of students want more control over their life,” says Al Osborne, senior associate dean at UCLA Anderson. “One way to do it is being self-employed. They also want to have impact.”