Here’s a Really Expensive Way to Start Your Own Business
When Sarah Rumbaugh enrolled at the University of Virginia Darden School of Business in 2013, she planned to launch her own business soon after graduation. The MBA, she figured, would provide her with the skills to help her do that and build a network of contacts. Darden’s program, which includes an incubator for student-run startups, venture capital workshops, and design courses, appealed to her. “If someone taught you how to play basketball from a textbook, you wouldn’t learn to play basketball,” she says.
Rumbaugh followed through on her plan a year before completing the program. In 2014 she co-founded RelishCareers.com, a recruiting platform that matches graduate degree recipients with employers. Over the past three years the venture has received $1.2 million in funding—she declines to name the investors—and has landed several big clients, including American Express, L’Oréal, and Under Armour.
Darden is among a handful of the U.S.’s top business schools, along with MIT’s Sloan School of Management and Stanford Graduate School of Business, that are trying to attract students like Rumbaugh by offering entrepreneur-focused programs. “We have labs, we have studios, we have accelerators and hackathons,” says Bill Aulet, managing director of the Martin Trust Center for MIT Entrepreneurship, which offers Sloan students courses, programs, and resources that encourage them to start their own business.
For students planning to pursue a more traditional career with a bank or consultant, such programs aren’t much of a selling point. Recruiters say the skills they emphasize—creativity, collaboration, or storytelling—are the least desired by bigger, established employers. That’s the finding from a survey conducted each of the past three years by Bloomberg of more than 1,000 corporate recruiters who place MBAs. Big and even midsize companies want to hire graduates who demonstrate qualities like leadership and strategic thinking, recruiters say.
Attributes that typify a great entrepreneur can make for a lousy hire, says Derick Kurdy, who works for Johnson & Johnson’s procurement team in New Jersey. In a typical year his team recruits about a dozen MBA graduates. “A lot of entrepreneurs don’t like to be told what to do,” he says. They get bored easily and don’t always mesh well with corporate culture. In a large organization, he says, “sometimes you just have to do what’s asked of you.”
Entrepreneurship carries a stigma of being less well-defined, says Michelle Hardy, director of MBA employer and alumni engagement at the University of Texas at Austin McCombs School of Business. About a third of the school’s graduates annually join tech companies, she says, and many of those employers “like the entrepreneurial spirit.” That can include being self-driven, resilient, and unafraid to take risks—useful and necessary qualities in many industries, Hardy says. “We’re not just preparing students for that first job out of B-school, we are preparing them for their second and third job, too.”
Most MBA graduates go to work for big companies in consulting, finance, technology, and consumer products. Of the 118 international and U.S. MBA programs ranked by Bloomberg in 2016, the median school had only 3 percent of its graduates starting businesses. Stanford had one of the highest rates, at 16 percent. “It’s a really costly way to go start a business,” says J&J’s Kurdy, given tuition and fees at the top-ranked schools. A standard two-year program at a top-10 school costs about $300,000, when including forgone wages.
B-school officials say the push to create entrepreneur-focused programs is driven by demand in the marketplace and by incoming students who grew up in a culture that idolizes self-starters such as Amazon.com Inc.’s Jeff Bezos and Facebook Inc.’s Mark Zuckerberg.
Before enrolling in 2012 at MIT Sloan, Elad Shoushan had worked as a software engineer at GE Healthcare and other companies. He wanted to start his own tech firm and settled on the Sloan MBA program specifically because of its entrepreneurship offerings. Shoushan founded his Boston-based startup, Ready4, in 2013, and he’s raised $15 million from venture capital firms. The skills that helped him start the company, he argues, should be valued more by recruiters and Big Business. “I would prefer any person who went through this process to come and work for us.”
The bottom line: At the median U.S. MBA program, only 3 percent of graduates go on to start their own business soon after finishing school.