Do you need an MBA to become an entrepreneur?

Recently I conducted an admission mock interview for MBA applicant who targeted one of the top business schools. At the end of the interview the applicant had an opportunity to ask me questions. One of the questions was if entrepreneurship can be learned in business school.

I believe that entrepreneurial classes taken during an MBA at a premier school will definitely add value to someone who has entrepreneurial spirit but lacks more formal analytical skills. In entrepreneurship classes students learn useful business concepts, create business plans, and acquire finance and marketing tools. It is just as important that they also learn how to analyze the viability of ideas.

Empirical research supports this conclusion as well. Researcher Donald Kurato (2004) argues that it is now definitively evident that entrepreneurship can be taught. Gorman, Hanlon, and King’s study (1997) states that “…most of the empirical studies surveyed indicated that entrepreneurship can be taught, or at least encouraged, by entrepreneurship education.”

The recent research paper ”Toward Effective Education of Innovative Entrepreneurs in Small Business: Initial Results from a Survey of College Students and Graduates” made by Summit Consulting, LLC for the Small Business Administration (SBA) presented some interesting findings:

- Graduates who have taken entrepreneurial courses are significantly more likely to select careers in entrepreneurship, which are defined as ever having founded, run, or been employed in a start?up or entrepreneurial team.

- Graduates who have taken entrepreneurial courses are more innovative, as quantified by the number of patented innovations, new production processes, and new services and products generated by these students. For example, while only 18% of all participants in the entrepreneurship report offered new products or services to customers, 86% of those who also took an entrepreneurial course reported belonging to a team that offered new products or services.

- Of all the entrepreneurial skill areas considered, “Developing a new entity to take advantage of new business?related opportunities” was the area in which the greatest difference can be seen in those who did and did not take an entrepreneurial course. Only 13% of respondents who had not taken an entrepreneurial course rated themselves as “extremely effective” in identifying new business?related opportunities, while 25% of respondents who had taken an entrepreneurial course rated themselves “extremely effective” in this skill area.

- While business schools can definitely help you to hone your business skills and to become a better entrepreneur from an educational point of view, in my opinion many of them still don’t invest enough in encouraging their students to pursue the entrepreneurship path immediately after school. Instead, schools focus on channeling their students to more traditional corporate careers.

According to Summit Consulting, researched rates of entrepreneurship are highest among those with the greatest and least amounts of education:

42.1% of Ph.D.’s (only 0.5% of the population) become entrepreneurs – the largest percentage, while 37.3% of those with less than a high school education (11.6% of the population) become entrepreneurs, the second largest percentage. MBA Programs are not among the largest producers of entrepreneurs. If you look carefully at the career statistics released by business schools, the percentage of entrepreneurs who started their businesses following their MBA programs will often not be mentioned since the number is so insignificant as to be negligible. So what this means for you if you are targeting entrepreneurship after school? We believe that choosing the right school is the key.

According to Business Week’s Best Schools for Entrepreneurship section, you should be looking at the following factors when choosing schools:

- “Does the program have institutional support? A great entrepreneurship program should have the backing of the university, from the president down. That ensures funding—important for still-developing programs—and facilitates interactions among the B-school and other parts of the university, such as the engineering school or the medical school.

- Who teaches the classes? You’ll want to be taught by faculty members who have experience both doing and teaching entrepreneurship. Academics with no street experience won’t be able to impart important real-world lessons. Also, remember that grizzled business vets may tell great stories, but that anecdotal evidence only goes so far. You should also look for depth and breadth in coursework.

- Does the school have a dedicated entrepreneurship center? If so, chances are you’ll have more resources and staff members to assist you in both course selection and career development. These centers often fill the void left by traditional career-services offices, which may or may not be able to help place MBAs who want to be entrepreneurs. Does the B-school have a business plan competition? Critics of such contests say the only thing they teach is how to win business plan competitions. That’s probably too harsh. Writing a plan is a valuable exercise for budding entrepreneurs. Plus, participating in – and especially winning – a competition gets you exposure to venture capitalists, who often serve as judges.

- What hands-on experience will you get? The best B-schools offer some combination of the following: opportunities to intern at local startup companies, ways to connect students with entrepreneur mentors, small business incubators, and access to capital from alumni or from the venture-capital community”.

We would also add one additional factor: how many students start their own business or join a start-up after getting their MBA.

Good luck and we look forward to hearing about your new business!