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MBA entrepreneurs: Why many bschool grads may never launch a startup
Written by Sameer Kamat
Here’s an intriguing phenomenon. We have seen the same trend in applicants who work with us on the MBA Mock Application Process (MBA MAP). A significant number of MBA applicants explicitly list entrepreneurship as a post MBA goal in their admission essays.
They do a fantastic job in explaining the brilliant entrepreneurial idea they have in mind, the skills & resources need to execute that plan and how an MBA will provide them with the perfect platform to launch their startup in technology, healthcare, education or any of the other ‘sunrise’ sectors. So far, so good.
But something changes the minute they step into the bschool campus and the mindset change continues as they move into the job hunting phase. The idea of launching a startup gets pushed back – “I’ll work in a regular job for a few years, make some money and then think about my dream to become an entrepreneur.”
The issue is that this self-consoling monologue moves out of sight and out of mind. For years the topic comes up in bschool re-unions and online interactions. But in their minds they know very well that it’s not going to happen any time soon.
What are the main reasons why this happens? MBA Crystal Ball shares a few points to think about.
Top 5 reasons why many top MBA grads won’t become entrepreneurs
MBA loans and sky-high fees
Many of the top MBA programs have fees that cross $150,000. Including the cost of living and the opportunity costs (lost income for 2 years), the overall cost of attending a top MBA program can be close to $300,000. That’s over 1.5 Crore Rupees!
Many of the MBA loan programs have payback tenures that run into 10, 15, 20 years. Unless you come from a filthy rich family, that kind of money isn’t exactly going to be pocket change for you. That itself might discourage many top MBA graduates (who hail from more modest backgrounds) from launching their dream startup companies and becoming entrepreneurs immediately after an MBA.
Predictability of corporate jobs over entrepreneurship
For intellectually rich but financially poor (immediately after completing the MBA) grads, the prospects of getting into high paying jobs in management consulting and investment banking careers seems like a quicker way to address the immediate goals of getting their bank balance health back to normal.
Startups, in contrast, have a much longer gestation period (often running into several years), before the entrepreneur can even expect to break even. Profits can take longer. The unpredictable nature of entrepreneurship ventures goes beyond finances. There’s the big question mark that accompanis every single facet of running the new company – market demand, operational inefficiencies, serious talent shortage.
Lack of real world skills
Reading ‘How to swim’ written by the best swimming coaches of the world would still not be sufficient unless you actually get into the icy cold water and get your butt wet. The same goes for entrepreneurship. It’s one thing to know about the ‘right’ way to launch a company, the ‘right’ way to recruit talent and the ‘right’ way to raise finances.
In the big bad world, knowing the right way could at best give you a direction. Nothing more than that. Often, many of the theoretically right ways to do things (taught in the class) are completely ineffective in gaining a competitive advantage in your niche. The challenge is to stay on the right path (i.e. not do anything that’s unethical or risky) and yet think of creative ways for yourself and your startup to reach the goals.
Cozy Corporate World versus the School of Hard Knocks
Entrepreneurship may look glamorous from the outside. But it can be damn messy specially in the initial stages when the supporting framework around the idea isn’t as perfect as it should be. Concepts that seemed fantastic when you first thought about it can be painful to implement, or you may realise that the market needs something different.
As the founder of the startup, you should be in a position to quickly adapt your product or service to the market needs. This could mean dismantling and rebuilding the operational process. Everyone around you – from competitors to clients – would be looking to knock you around because they’d assume you are too puny to fight back.
For those who have ‘grown up’ (professionally) in a comfortable corporate environment, it can be a pretty humbling experience. And the (bloated?) egos of many top MBA grads aren’t ready to take that hit.
Potential entrepreneurs waiting for the eureka moment
Many MBA students assume there would be that magical moment somewhere in the MBA program or after they’ve graduated that’ll give them all the answers they’ve been waiting for. The Grand Vision of how everything around their entrepreneurial startup falls in place, so all they need to do now is raise finances and set the ball rolling. Ain’t gonna happen, my friend!
Maybe there are other reasons as well, and we’d love to hear your thoughts.
If you are planning to go to a bschool (or even if you don’t have MBA aspirations), what would you prefer – working in a regular corporate job or starting your own company? Why?