After three to four years in the corporate world, most ambitious young professionals start thinking about the next step in their career. For those with an entrepreneurial bent like myself, the draw of starting their own company can often feel at odds with the safer, well-travelled path of going to business school.
When it came time for me to decide on whether or not to attend business school, I knew I wanted to eventually start my own company. Between my experiences as a management consultant, as well as my product and marketing roles at multiple tech companies, I felt that I had enough operational experience to make that leap sooner than later. Additionally, I had already studied Economics and Finance during undergrad, making the academic part of an MBA seem a little redundant.
Is business school really necessary?
As I read stories of college dropouts who had successfully sold tech companies, or entrepreneurs with innovative ideas who made it big on Shark Tank, it became clear that there was no set path to startup success. In fact, in some entrepreneurial circles, having an MBA is viewed as a red flag. Once I considered the hefty $200K all-in price tag, skipping business school almost seemed like the obvious decision.
Maybe it was my risk aversion, or perhaps it just seemed irresponsible to pass up an opportunity that so many others dream about, but despite my skepticism regarding business school, I decided to pursue my MBA at Wharton.
Like many of my classmates, I simultaneously launched my own company (VeryApt, personalized apartment recommendations) during my two years at Wharton. During the process, I discovered that there are many ways in which an MBA accelerated our company’s growth and improved our likelihood of success.
Here are 5 ways attending business school will help you start your business—and be more successful:
1. Business school provides a foundation in business principles
While there is no substitute for operating experience, there are many parts of the business school curriculum that are directly useful to the way an entrepreneur should think about the business they are starting. While at Wharton, there were three classes that I found particularly pertinent during both the formation and the continued operation of VeryApt.
Legal Aspects of Entrepreneurship: While the exact title and contents of this class may vary depending on the business school you attend, as a first time founder, it’s incredibly important to understand all of the legal considerations around starting your own company (e.g., C Corp versus LLC, non-competes, liquidation preferences, preferred versus common stock, and so on). While there is a wealth of information available online, it’s all a lot more tangible when you have case law and real life anecdotes attached to these considerations.
Accounting: There is no substitute for learning the fundamentals of accounting. Whether you plan to hire an accountant or depend on QuickBooks, there are some basic principles around understanding your working capital, cost of goods sold (COGS), gross margins, and so on, that are critical to all types of businesses. This can be particularly important for founders with “non-traditional” career backgrounds.
Entrepreneurship: While entrepreneurship classes can sometimes feel outdated and contrived, they can be useful in terms of developing a framework to evaluate the quality of an idea, and then laying out a roadmap to build a business around that idea. An entrepreneurship class won’t ensure that you come up with a good idea, but it will certainly help you rule out a lot of bad ideas.
2. It’s a place to form a founding team
One of the biggest reasons startups fail is because the founding team either lacks the necessary experience to execute on their vision, or they discover that they have difficulty working together.
If forced to pick a cofounder from your three to four years of career experience, you may find it difficult to find someone with a similar risk tolerance that has a skill set significantly different from yours. The great thing about business school is that you have hundreds of potential cofounders to choose from, and you get to test drive their commitment and your ability to work together during your two years.
Plus, since you aren’t forcing people to quit their current job to work on the company, you don’t have to immediately formalize the ownership structure of your company during the early idea stages. Instead, you get to work through the business planning and prototyping stages with limited legal structure. By the time you are ready to formalize the arrangement, you should have a very clear sense of what a future working together will be like.
If you’ve discovered during the process that your cofounder is irrational or difficult to work with, it’s probably time to part ways. I was fortunate enough to meet one of my cofounders during the first week of business school.
3. It allows for rapid idea validation
One drastically underrated advantage of founding a company while in business school is access to a very large test group that can help you validate your idea. This is particularly useful if you are catering to a millennial customer. Business school students are very open to completing consumer surveys, trying out new products, and providing feedback on ideas.
By starting your business while in business school, you can rapidly iterate on an idea while getting constant feedback from your target demographic. While at Wharton, I saw this carried out in a variety of ways across several industries, but here are a few examples:
Two classmates of mine started a company with the goal of creating the perfect modern Italian sandwich. During the early stages of the process, they launched a catering business and were able to cater several business school events, all the while refining their menu and getting firsthand experience test driving their concept. By the time of their restaurant’s grand opening, they were able to build a brand around their restaurant, perfect their menu, and develop a clear understanding of their operating costs.
Another couple of classmates spent their two years at Wharton launching an eCommerce handbag brand. They set out to develop a stylish yet functional handbag for the modern working woman. Business school provided them the perfect opportunity to work closely with their target customer. The initial sales for any eCommerce brand can be particularly difficult and require high customer acquisition costs; however, in this case, they were also able to pre-sell their product to their fellow classmates, which provided a lot of added confidence during the initial manufacturing run.
4. It helps mitigate startup risk
As a founder, I would say it’s almost impossible to properly assess the level of risk you take on when starting your own company. In many ways, the startup process requires the founding team to be irrationally optimistic about success at every stage.
However, for most entrepreneurs, there is a period of time during which they are simply getting their feet wet with a new idea. They are intrigued by a unique opportunity, but haven’t decided to fully commit. For many people, the risk of quitting their job, foregoing income, and creating a resume gap can seem daunting. This can be particularly difficult if you are seeing a lot of success in your current career progression.
However, by attending business school, you’ve already formally committed to quitting your job and foregoing income for two years. At this point, starting your own company is really a risk-free event because you’ve eliminated the opportunity cost and the resume gap. Worst case, your startups fails, but you are able to parlay your learnings plus your MBA into a step up in your career. Best case, you are able to spend the two years of business school fully testing and validating your idea prior to making it a full-time commitment.
5. It provides access to greater fundraising opportunities
Regardless of whether you are planning to start a small business or a venture-backed startup, fundraising in some capacity is probably in your future. The fundraising process may start with friends and family, but may quickly shift to a bank loan, individual angel investors, or at a later stage, venture capital or private equity.
During our fundraising conversations, I’ve been constantly amazed by the percent of people I’ve spoken to in the venture capital community that have MBAs. Additionally, many of our angel investor introductions have come through the Wharton alumni network. In fact, many business schools have their own angel networks that may be able to help during the fundraising process.
An MBA won’t guarantee that you will be able to raise money for your company, but it should help you start conversations with potential investors that you might not otherwise be able to have. It will also provide a level of credibility during your investor meetings that is hard to come by for first time entrepreneurs.
Which business school should you choose?
Ultimately, all business schools are not created equal. If you are serious about starting your own company while getting your MBA, make sure you pick an MBA program that has shown a commitment to entrepreneurship.
How to choose the right business school:
- Take a look at the curriculum ahead of time and make sure that the university offers a set of classes that cater to entrepreneurs.
- Identify startup success stories at each program you are considering and determine which MBA program’s alumni have a history of launching companies that most resemble the type of company you would be interested in. For example, if you are interested in launching a health care startup, you don’t want to go to an MBA program where most of the success stories are in fashion and eCommerce.
- Look for a strong alumni network with individuals that will be able provide strategic operational advice and will be able to make intros during the early stages of your business.
- Make sure you still pay attention to the overall brand of the MBA program. Your first business venture may not work out, so make sure the MBA you are left with is worth the two years and the $200K you are committing to it.
Choosing to attend business school (and deciding which school to attend) can be a tough choice, so weigh it carefully. While there are plenty of entrepreneurs who will tell you to skip business school entirely and jump straight into launching your startup, there are benefits to getting your MBA that you just can’t reap unless you attend.
Do you think entrepreneurs should go to business school? Why or why not?