Stanford on Whether You Can Teach Startups to MBAs: Sort Of

Students in class at the Stanford Graduate School of Business CoLab Photograph by Steve Castillo/Stanford GSB

Based on the props, you could be forgiven for assuming that kindergardeners, rather than business students, had gathered in a vast room at Stanford University this Monday. Oversize markers were strewn across tables, colorful sticky notes adorned white boards, and little baggies of gummy candies and M&Ms dotted desks. MBAs at Stanford’s Graduate School of Business were using the arts and crafts supplies to develop the plans for their future companies.

As part of a class called Startup Garage, 128 students are guided through the steps they’d take if they wanted to launch a business. The class is divided into teams, each of which conceives of a problem that exists in the world—say, a restaurant that’s losing customers because it doesn’t deliver—and comes up with a fix. In the case of DoorDash, a startup offering delivery services to small businesses, that pedagogy became highly profitable. Since taking the class, the two Stanford alums who launched the company have raised nearly $20 million in funding, according to their website.

Bloomberg Businessweek talked with Russell Siegelman, who co-teaches the class and spent 11 years working at the venture capital firm Kleiner Perkins Caufield & Byers, about how to teach startups. A transcript, edited for length and clarity, is below.

To what extent do you think you can teach students to be entrepreneurs?
I think you can teach certain aspects of entrepreneurship in a class like this. You probably can’t teach all of them. If you’re just a really risk-averse person, no amount of this classroom [experience] is going to make you less risk-averse.

Does this class teach people how to manage risks?
We run a lean startup process, and a lot of that is identifying key risks up front and running low-cost experiments up front to sort of “de-risk” those risks, before you risk a lot of time and money.

Can you explain what the lean startup process technically means?
What we teach here is to use a process by which you run a series of experiments about all aspects of your business. You usually start with who the customer is, and does the customer really care about the problem? That’s the first thing we’re working on.

[The students] are focusing not on solutions at all, just on needs. You run a set of experiments to find out what those needs are, then run a set of experiments about your solutions. So build a prototype, make it simple, make it cheap, make it easy, so it doesn’t take months and years of engineering.

Does this approach allow people to retain ownership?
If you do it right, you preserve a lot of option value for you, in the form of equity, because you don’t sell equity until you really have firm traction.

Silicon Valley, broadly speaking, has been criticized for coming up with a bunch of solutions to problems that affect the people they know but potentially don’t serve a broader public interest. I wonder whether you feel you can teach people out of that?
I think a really good question is: Can you get students like this thinking out of the Silicon Valley bubble? They’re young. What’s their work experience? It’s limited. What’s their life experience? It’s limited. I think that’s a real issue. And I think that’s one of the reasons you have this navel gazing that goes on in the Valley. A lot of young people come from the same socioeconomic status, they see their buddies do the same kinds of things, so they’re kind of in the same tumbler of ideas.

Peter Thiel’s theory is that business school is not a place where people conceive of original ideas. What do you think of that?
I think there’s some truth to it. There’s a bit of navel gazing, there’s a bit of everybody being in the same bubble of ideas. But then you ask Peter how many times has a person from Peoria walked into his office that he thought was a great entrepreneur and he gave a million dollars to?

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