Why Entrepreneurs Hate (Most) MBAs

A version of this article previously appeared on Forbes.

Someone on Quora recently asked me to answer the following question: Why Do Digital Entrepreneurs Hate MBAs?

As I stated in my Quora answer, "hate" is the wrong word. Tech entrepreneurs' consternation with MBAs does not rise to the level of loathing. Rather, entrepreneurs' frustrations are often due to an incongruence between an MBA's expectations versus the value they can deliver to a startup.

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Startups Need Execution, Not Administration

Despite the proliferation of entrepreneurial courses within Business Administration programs, business schools are essentially vocational training grounds for consultants and investment bankers.

Five reasons many MBAs struggle at startups are as follows:

1. Tool Users - Startups often have a long gestation period in which the team is in discovery mode, defining the company's value proposition, target market, pricing, business model, etc. Thus, startups need people who can identify and prioritize problems, not just solve those that are already defined.

MBAs graduate with an analytical toolkit that can be readily applied to solve known problems in a deliberate manner, especially when reams of data are available. Thus, it is no surprise that Harvard recently reported that 25% of its 2012 graduates accepted jobs as consultants, while 52% opted for careers in financial services.

2. Limited Entrepreneurial Experience - The admission process of top business schools emphasizes undergraduate grades and standardized test scores. As noted in Startup Advice From College Dropouts, successful entrepreneurs are often poor students.

Additionally, just as MBA graduates gravitate to consulting and investment banking, the majority of business school enrollees are also drawn from these industries (along with public accounting). Thus, relatively few MBA candidates enter B-school with meaningful entrepreneurial experiences.

3. Golden Expectations - Top MBA programs are expensive and their graduates have astronomical salary expectations. Per the 2012 Global Management Education Graduate Survey, the median debt of 2012 MBA graduates was $45,000, while the debt from top schools averaged $90,000 (e.g., Wharton graduates averaged more than $114,000 of graduate school loans).

This same report notes that MBAs will be granted a median starting salary of $90,000, plus an average signing bonus of $15,000. Unfortunately, the 2012 QS TopMBA.com Applicant Survey notes that, on average, MBAs expect to earn $153,000 upon graduation.

When I graduated from Wharton in 1989, I was one of the few in my class who shunned the investment banking / consulting path for the life as an initially unpaid entrepreneur. I was able to follow the startup path because I had no school debt and my wife had a stable, well-paying job. Sadly, relatively few entrepreneurially minded MBA graduates can now afford to accept a below-market salary at a startup.

4. Action vs. Analysis - Although its use is in decline, many MBA classes are still taught via the Socratic case method. This approach is effective when reviewing historical scenarios in which abundant data is available and a menu of potential decisions are readily evident.

Outside of the classroom, startups seldom have enough time, information or money to view the world through the rearview mirror. As such, much of the benefit derived from the case study methodology is inappropriate in an entrepreneurial setting where greater value is placed on execution, rather than analysis.

I recall a lengthy Harvard case from my days at Wharton that explored a large company's convoluted decision process to move from wood to fiberglass skis. At the time  we reviewed the case (the late 1980's), the transition from wooden skis was nearly 20-years in the past.

Rather than create a task force to study this issue, an entrepreneur would decide to transition from wood to fiberglass after quickly reviewing the new material's value proposition: cheaper, more durable, easier for beginners to master and improvement of experienced skier's capabilities. Done.

5. Attitude - I have numerous friends who also happen to have earned an MBA. However, my friends notwithstanding, the reality is that many graduates from top Business Schools are tools. They are often more focused on building their careers, rather than building collegial teams. This proclivity for a cutthroat, rather than a collaborative culture, is detrimental to startups, which require everyone to row in the same direction with a low drama quotient, lest the startup boat will sink.

Look For MBA Outliers

Top business schools are effective at identifying intelligent, ambitious people. Entrepreneurs should leverage the screening performed by B-schools and not dismiss MBA applicants outright.

Thus, if you encounter an action-oriented MBA who has practical startup experience, is willing to accept equity in lieu of a market salary and exhibits a collaborative attitude, ignore their MBA handicap and hire them immediately.

Follow my startup-oriented Twitter feed here: @johngreathouse. I promise I will never tweet about MBA hating or that killer burrito I just ate.

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John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara's Faculty where he teaches several entrepreneurial courses.


Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.





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