Entrepreneurial Spirit Soars on B-School Campuses
With the job market still rocky, a growing number of MBA students are launching their own businesses straight out of school. Recruiting remains down at many campuses this year, and as a result, starting a company looks more appealing than ever to beleaguered B-school students. At business schools across the country, students are signing up for entrepreneurship classes in droves, entering business school competitions, and dangling their carefully crafted business plans before angel investors and venture capitalists. In response, schools are escalating the support they offer to aspiring entrepreneurs, launching new classes and counseling them on how to get a business off the ground in a difficult economic climate.
At the Zell Lurie Institute for Entrepreneurial Studies at the University of Michigan Ross School of Business (Ross Full-Time MBA Profile), entrepreneurship is thriving. The institute runs a business competition, the Michigan Business Challenge, which awards nearly $60,000 in funding to winners. This year the contest received a record 85 applications from Michigan University teams. Business plans ranged from an online retailer of premium hair care products for black women to a company that will sell electric motors to long-haul truck manufacturers.
Bloomberg BusinessWeek reporter Alison Damast recently spoke to Thomas Kinnear, director of the Zell Lurie Insititute, about how the school is assisting students who want to launch their own business.
Alison Damast: Entrepreneurship is hotter than ever on business school campuses. How do you account for the new wave of interest in entrepreneurship?
Thomas Kinnear: It's a trend that will probably only get bigger and bigger. What is driving [student entrepreneurs] is they see more opportunity in controlling their own fate. To some extent, what they see around them now is that even successful companies are letting people go. I think what has happened is the practicalities of the financial meltdown over the past 18 months have driven a lot of smart people who thought they were going to Wall Street to head instead into entrepreneurship. Their view of being an entrepreneur is to be a fund manager on their own, start a small boutique capital firm, or launch a more traditional company.
How many members of the school's MBA class will end up taking a class at the Lurie Institute during their time in school?
About half of the MBA class will be touched by one of our courses in entrepreneurship in any given year. A few years ago we offered less diversity, but now we have such a broad range of classes they are basically all full. We also offer quite a few classes that you have to apply to get into, like one called the Wolverine Venture Fund class, which teaches MBA students about the venture capital business.
A lot of students come into business school knowing they want to pursue entrepreneurship. More recently, a growing number are turning to it in the midst of their MBA studies in response to the tough job market. Is this changing the way students approach the traditional campus recruiting process?
Some do regular second-year recruiting, while some come in with their minds so made up that they'll entirely skip that process. With the students who do the recruiting and also work on a business plan, what typically happens is some of them will get a great offer from McKinsey, Microsoft (MSFT), General Mills (GIS), or Goldman Sachs (GS). They've taken out loans and know they're going to be $100,000 in debt after business school, so they decide to take a job for a couple of years and then start their own business. I'd say about three-quarters of the students I counsel take a regular job for a few years and one-quarter start their businesses right after graduation.
Which group of students is gravitating the most towards starting their own companies?
Where I'm seeing it the most is in the part-time and executive MBA programs. A lot of the other schools have always had a significant interest in entrepreneurship among students, but it has escalated. I'm starting to see even doctors and lawyers and people with advanced degrees in engineering coming to us because they're looking for a different way of doing things.
Do you think interest in entrepreneurship is escalating partly because more members of the millennial generation are entering business school?
The millennials confronted a shock to their system with the economic downturn, because they grew up in pretty good times and have not been confronted with this kind of trauma before. There is a tendency among millennials to think they are entitled, but you are starting to see some breaking free of that. Many are smart enough to recognize what is going on and are realizing they have to make their own go of it. For many of them, entrepreneurship is a logical thing to pursue.
Many business schools in recent years have started business-plan competitions, which are often a barometer of students' interest in entrepreneurship. Your school runs one called the Michigan Business Challenge. How competitive was it this year?
We had more than 80 student teams enter this year, and most of those teams had a technical focus—they were combinations of engineering, medical, and business school students. Others were straight-up business students trying to form different companies. The companies that tend to do well in our competitions are ones that have this great marriage of technology ideas and business acumen. We're up about 10 student teams from last year, [when we were] up about 10 from the year before, so interest in the contest is continuing to accelerate.
What are other ways besides business competitions that student entrepreneurs can find seed funding?
Competition is the one obvious path. If their idea is good enough and they can get enough people to pay attention, we'll introduce them to the venture capital community and some angel funding groups. Between that, government programs, and grants, they can usually get the seed funds to get started. After that, if they have a good enough idea and good enough management team, they can justify to the big venture capital firms that they are worth funding. In the end, their success is their success, and the ability to raise money or other issues falls on them. But in this environment, it has become more difficult to do that, so we are trying extraordinary things to help them.
Starting a business in an economy like this must pose some unique challenges for students. How are you preparing them to face what will likely be a challenging market after they graduate?
The key is that we are not throwing them to the wolves. Part of the dynamic here is to give them training, coaching, and practice. We run coaching sessions through the Zell Lurie Institute, and more students are coming in for one-on-one coaching by faculty members. I think students are becoming much more open to coaching and are realizing that starting a business is a complex endeavor and they need some business and technical acumen to drive these things forward.