Key Moments
How Should Business Schools Prepare Students for Startups? – Jeff Bussgang and Michael Seibel
Y CombinatorKey Moments
Business schools need to better prepare MBA students for startups by fostering technical co-founders, emphasizing commitment, and demonstrating traction.
Key Insights
MBA programs often fail to equip students with the fundamental skills and practical experience needed for tech startups.
A critical gap exists in MBA programs regarding the development of technical co-founders and the understanding of product development.
Commitment to the startup, demonstrated traction, and a focus on Minimum Viable Products (MVPs) over extensive research are crucial for startup success.
Business schools should increase technical proficiency, foster interdisciplinary collaboration (especially with engineering students), and integrate more current industry practitioners.
While not all MBA programs are created equal, top-tier schools in innovation hubs offer more opportunities for entrepreneurial students to connect and learn.
Students and educators should recognize the value of practical experience and foundational startup knowledge, moving beyond theoretical case studies.
THE MBA STARTUP DISCONNECT
Michael Seibel of Y Combinator observed a significant gap in MBA applications, noting that many business school graduates lacked fundamental knowledge crucial for tech startups. This frustration stems from reviewing thousands of applications and seeing a recurring deficiency in basic tenets that YC considers essential for founders. While business schools aim to prepare students for entrepreneurship, Seibel argues they are falling short, and this is particularly concerning given the high cost of MBA programs. The discussion highlights that certain core principles, if not understood or applied, can be immediate disqualifiers for programs like YC.
IDENTIFYING KEY RED FLAGS FOR MBA FOUNDERS
Seibel identifies three primary red flags observed in MBA applicants: the lack of a technical co-founder and a tendency to outsource technology, insufficient team commitment to the startup as a primary focus, and a failure to demonstrate traction. The willingness to outsource core technical aspects of a tech business is seen as a major pitfall. Furthermore, commitment is crucial; startups need a team fully dedicated, not one contingent on external validation like funding or acceptance into accelerators. Finally, traction, or the demonstrable progress made on a product or service, is vital, underscoring the value of practical application over abstract research.
ROOT CAUSES WITHIN MBA PROGRAMS
Jeff Bussgang, an HBS lecturer, points to the siloed nature of many MBA programs as a root cause for these issues. Technical talent within universities often remains inaccessible to business students. Additionally, there's a general lack of technical proficiency among MBA students, though this is slowly changing with initiatives like coding clubs. A significant problem is also the insufficient integration of current industry practitioners. Professors may have theoretical knowledge but lack recent operational experience in the fast-paced startup world, making their teachings potentially outdated or impractical for today's entrepreneurial landscape.
REFORMING MBA CURRICULA AND STRUCTURES
To address these shortcomings, Bussgang suggests several potential reforms. One approach is to increase the proportion of students with engineering or technical backgrounds in MBA programs, fostering organic collaboration and easier formation of technical co-founder teams. Alternatively, or in conjunction, business schools could enhance technical proficiency through curriculum additions, focusing on skills like prototyping and technical architecture for managers, rather than aiming to create coders. Integrating engineering schools more closely with business schools, as seen in initiatives at Harvard and MIT, can create more opportunities for cross-pollination and innovation.
BEYOND THE IVORY TOWER: PRACTICAL APPLICATION AND HUSTLE
The discussion emphasizes that while top-tier business schools in major innovation hubs offer advantages, entrepreneurs in other locations must actively "hustle" to build necessary networks. This involves proactively seeking out technical talent and forming connections, whether through online tools or persistent networking. Bussgang notes that many people remain in a "research mindset" because they lack the practical skills or connections to build an MVP. Seibel expresses frustration when founders overcompensate for foundational weaknesses through sheer hustle, as this doesn't negate the inherent risks of not having critical elements like a technical co-founder.
THE FALSE EQUIVALENCY: UNIVERSITY PEDAGOGY VS. VC REALITY
A key distinction is made between the pedagogical goals of universities and the rigorous demands of venture capital. Universities often prioritize student learning experiences, allowing for more experimentation and a 'softer' approach. In contrast, VCs evaluate businesses based on market potential, disruption, and a clear path to massive scale. Bussgang argues that entrepreneurship courses should reflect this reality, offering advanced-level content for serious founders, akin to higher-level specialized courses in other academic fields. The idea that anyone can build a billion-dollar company is presented as an overly simplistic notion, similar to suggesting anyone can become a professional athlete.
THE STRATEGIC CHOICE: MBA VS. EARLY-STAGE STARTUP
The conversation then delves into the dilemma for aspiring entrepreneurs: should they pursue an MBA or gain experience at an early-stage startup? While an MBA offers a valuable network and long-term career development, a practical stint at a startup can provide immediate, high-ROI experience. The decision hinges on long-term goals; an MBA from a top program might enhance executive scalability and networking over decades. However, for those not attending a top-five school or lacking technical skills, gaining direct experience in a startup city may be more beneficial than pursuing a less impactful MBA.
VALUE OF CREDENTIALS AND NAVIGATING BAD ADVICE
It's noted that an MBA serves more as a credentialing mechanism than a direct learning experience for many in the tech industry, suggesting students should maximize its value. When facing poor or unqualified advice within academic settings, students are encouraged to seek out established entrepreneurial resources. This includes reading foundational texts and blogs by respected figures in the startup world, acting as a kind of "canon" for entrepreneurs. If a university course doesn't cover these essential materials, it may not be the right fit for an aspiring founder.
VC INVESTMENT CRITERIA AND MBA FOUNDERS
From a venture capitalist's perspective, investing in MBA students typically involves the same stringent criteria: massive market opportunities and disruptive potential. Bussgang highlights that while MBAs can identify innovative business models (like Blue Apron), the truly transformative ideas often stem from technical founders with a unique vision. VCs look for transformative insights and white space, which requires a deep understanding of technology and markets. While not impossible, for an MBA applicant to secure VC funding, their idea must meet these high bars of disruption and market potential, rather than just being a clever business spin.
Mentioned in This Episode
●Companies
●Organizations
●People Referenced
MBA Startup Success: Dos and Don'ts
Practical takeaways from this episode
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Common Questions
MBA programs can be siloed, making technical talent inaccessible. There's often a lack of technical proficiency among students, and insufficient engagement with current industry practitioners, leading to outdated or theoretical teaching.
Topics
Mentioned in this video
Mentioned as a successful startup founded by a Harvard Business School alumna.
Highlighted as a startup co-founded by Harvard Business School alumni.
Jeff Bussgang is a General Partner (GP) at this firm.
A startup accelerator that Michael Seibel is CEO of. They review thousands of applications from aspiring entrepreneurs, and Seibel noted that many MBA students lacked basic tenets for startup qualification.
Cited as an example of successful companies founded by Harvard Business School alumni.
Cited as an example of a transformative and disruptive company that originated from a purely business model insight, co-discovered by a Harvard MBA.
Author of influential blogs and books on startups, recommended as essential reading ('the Canon') for aspiring entrepreneurs who are not receiving adequate guidance from their MBA programs.
Contributed funding towards the physical relocation of Harvard's engineering school to be closer to the business school, intended to enhance interdisciplinary collaboration.
CEO of Y Combinator, who initiated a conversation with Jeff Bussgang after tweeting about his observations on MBA applicants to YC, noting a lack of fundamental startup knowledge.
His contributions to startup literature, along with blogs and books, form part of the recommended 'Canon' for aspiring entrepreneurs, especially if their MBA programs lack proper startup education.
A significant funder for the initiative to physically co-locate Harvard's School of Engineering and Applied Sciences with the Business School, aiming to foster more social engagement between disciplines.
A lecturer at HBS and GP at Flybridge Capital Partners who engaged in a discussion with Michael Seibel about how business schools prepare students for startups.
An author and entrepreneur whose writings on startups are considered part of the essential 'Canon' for those seeking to understand entrepreneurship, recommended for MBA students with poor institutional guidance.
Author of 'The Four Steps to the Epiphany,' a foundational text in startup methodology, recommended as part of the essential reading ('Canon') for MBA students seeking practical startup knowledge.
A group known for analyzing and ranking unicorn startups founded by MBA graduates.
Jeff Bussgang is a lecturer here. The discussion touches upon HBS's efforts to prepare students for founding companies and recent initiatives like a joint degree combining MBA with an MS degree.
Mentioned as an institution that does a better job of integrating technical people into its MBA program compared to HBS. Its School of Engineering is physically moving closer to the Business School location.
A new club at Harvard Business School aimed at increasing technical proficiency among MBA students, reflecting a broader trend of adding technical skills to business education.
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