Short answer: Definitely not. At least Bill Gates, Larry Ellison, and 20 successful business people don’t think so. Guy Kawasaki, a famous venture capitalist, recommends founders:
I don’t think an M.B.A. matters very much for starting a company. A much better educational background is an engineering degree. You can always hire MBAs, but if you don’t have the ability to conceptualize and deliver a product, you’ve got nothing.
Now onto my long answers, with my thoughts:
Wait, do you need an MBA to learn what you need to operate a startup? Maybe not. Starting up a venture is totally different from managing one. To start up, you need your time to work on the idea. More importantly, you need skills to execute it. Now the execution is not how well you manage your business, but your technical skills to implement your idea. Even if you have enough seed funds to hire engineers to work on it, you will still need enough technical skills and experiences to lead and guide them.
How do you know all those things about finance, business law, sales and marketing, when you have not studied an MBA? Most of my knowledge is accumulated from my previous management role at a publicly-listed company. How about the aspects that I wasn’t familiar with? I read books, articles and consult people for advice.
I spent two years of my time studying a part time post-graduate business course. In that particular university, the coursework for an MBA is similar to that of the post-graduate business courses. Was it useful? Maybe, but I believe I would have acquired the same knowledge simply by reading its coursework books. My goal was different back then, I wanted to climb the corporate ladder. Fortunately, it was just a part time course that I was fully sponsored for, so there were no regrets. If my goal had been to become an entrepreneur, I wouldn’t have spent time and effort on studies when I could have made good use of my time to work on my business ideas.
In addition, MBA and post-graduate business courses are targeted to people with sufficient management experiences. In many assessments, MBA students are required to relate the theory to an actual real-life work situation. Without relevant work experiences, the coursework only becomes a complete frustration of theories that you don’t know how to apply.
So what’s an MBA useful for? I would say two reasons. One is to climb a corporate ladder. Second is to extend your networks. If you are in for the first reason, you are probably aspired to work at a large corporation where an MBA qualification allows you to stand out among your competitive colleagues. Though I do know many senior management people who would value the real experience in management more. In startup environment, no one will consider you as a better founder because you have an MBA under your belt. If you are in for the second reason, you might be able to achieve the same results by spending the 2 years time and the course money to attend conferences and meetups and brush up your networking skills.
Is it better to be a “business guy” or a “technical guy” as a founder? Recently, a few people told me they have some great ideas and want to start up a venture. They asked if I know of any hackers around who may want to help, as they couldn’t execute the idea because they lack the technical knowledge to do so, and they are having a hard time finding a hacker that can help them.
I would say you rather be a “technical guy” if you want to start a startup. And yes, in my experience, I have less trouble finding a “business guy” that can help me with finance and operation stuff, at least in a small business operation context.
David Heinemeier Hansson, partner of 37signals, has identified an interesting phenomenon of some successful companies in his post “The MBA myth“:
Many of my favorite companies are driven by people at the top who intimately know how things should be because they could make them so. The obvious example is the detail-oriented nature of Steve Jobs at Apple. But a few other examples I like are Ulrich Bez at Aston Martin who’s not only the CEO but also part of the company racing team at places like Le Mans. Or Thierry Nataf at Zenith who’s CEO and head designer of their luxury watches as well.
And in the article “How to Start a Startup“, Paul Graham makes a great point:
If you work your way down the Forbes 400 making an x next to the name of each person with an MBA, you’ll learn something important about business school. You don’t even hit an MBA till number 22, Phil Knight, the CEO of Nike. There are only four MBAs in the top 50. What you notice in the Forbes 400 are a lot of people with technical backgrounds. Bill Gates, Steve Jobs, Larry Ellison, Michael Dell, Jeff Bezos, Gordon Moore. The rulers of the technology business tend to come from technology, not business. So if you want to invest two years in something that will help you succeed in business, the evidence suggests you’d do better to learn how to hack than get an MBA.
If you want to be a VP or a C-executive of an established startup, maybe then you would rather be a business guy.
If you are a technical guy but you have trouble starting up a company. What’s the real problem? Hard to say, but definitely not because you don’t have enough business and management knowledge. Maybe you are not working on something that customers want. Maybe the market of your products and services are saturated. Maybe you never had a prototype or beta of your idea to push to the potential customers, and improve it from there.
I would say it is not about your business and management skills because if you have completed a great beta version of your idea, all you need is a business plan and channels to sell your idea. In most cases, you will need early adaptors’ support on your product, and networking skills to find potential investments. But of course, if your product sucks, you don’t need the latter because your startup won’t succeed anyway. What then? Rework your product and make it great.
So If you want to start a successful startup, what do you need to do? Create a product that customers want. Without that, you won’t get anywhere even if you have an MBA or managed a 10,000 people company.
Terry Tong
July 6th, 2008 at 10:15 am
Nice post, Leon.
“It is not so very important for a person to learn facts. For that he does not really need a college. He can learn them from books. The value of an education is a liberal arts college is not learning of many facts but the training of the mind to think something that cannot be learned from textbooks.” — Albert Einstein
Someone can also argue that an MBA does the same thing on training the mind to think something that cannot be learned from textbooks. So if an MBA has little value in starting up a successful company (which I think in reality, we’ve seen both successful examples and unsuccessful examples of MBAs, so it’s hard to generalize), then probably a university education won’t contribute much either (because both are similar in the way that they train your mind to think, not the learning of many facts). And yes, there are real examples of people who are doing great in starting up great companies without a university degree: Bill Gates, Steve Jobs, Michael Dell or the recent phenomenal young dude: Mark Zuckerberg (at least until this day still haven’t completed his degree).
But I don’t think that many people would agree that if you want to start a successful company, then you should do it without attending university, it saves 3 or 4 years of your time and money (and technically, you can, if you really want, it’s actually quite easy to do and it seems that all the elements of building a successful company don’t have a direct relationship with a university education, so it should be safe to omit it). Why prejudice on MBAs? MBA can’t make someone a successful entrepreneur, there is no doubt about it; but nor can a college degree or engineering backgroud or any other education. But like a college degree or engineering background, MBA does no harm if you want to start up a company or even a successful one. (But I guess probably the truth is, as described in your post. To many people, the purpose of an MBA is either to climb a corporate ladder or to extend your networks. But still, it doesn’t conflict with starting up a company and being an entrepreneur. And I believe that to many people, a college degree or engineering background is either to have a higher paid job than those who don’t have a college degree or to climb a corporate ladder, although nowadays, more people choose to do Masters in the hope that it may help them climb the ladder faster. But still, it doesn’t conflict with starting up a company and being an entrepreneur.)
As I look back on my own past, I have to admit that I have forgotten most of the stuff I have learned while I was studying at the university and for all the things I know today (such as writing programs), I could have done it without doing a computer science program. Self-study is probably enough. But I don’t feel that I have wasted my time attending college (so, Einstein’s quote actually does make some sense to me) because I think the experience alone is worth it. MBA isn’t that much different, I think some people do have similar feelings, especially those who have done it, the experience alone is worth it. Life is a journey, not a destination. So whether MBA is good or not so good to starting your own company is totally upto your interpretation, no single point of view is the only correct interpretation.
I think entrepreneurship or business (or any other form of behavior of human society) is too broad a topic to reach a certain set of views. People are different (and I am biased to believe that some people are born to be more gifted in certain areas, including entrepreneurship and business, than other people), something is achievable for a certain group of people, but for others, it’s impossible. Even you tell them exactly the steps on how to do it, they just won’t get it, regardless how hard they try. So even the best advice won’t help everyone. For those to whom the advice applies, they tend to agree with it; others tend to disagree with it. What I am trying to say here is that for some of the advice given by those successful people on entrepreneurship or business (mentioned in this post or elsewhere), it probably won’t work for everyone. If you are not the “right” person or don’t have the “stuff” to excute and you are trying to follow or mimic what they have said, you will likely fail (but in this case, you will fail anyway with or without those advice). Despite the fact that those advice are invaluable to some other people.
Finally, I’d like to provide another example to illustrate my understanding that you should not always try to follow or mimic what some successful people have done because you are you, not them (and thus we still need to have computer science programs offered at universities and you should take them if you want to be a hacker):
Stiff asks, great programmers answer
Simon Newstead
July 7th, 2008 at 12:06 am
Hi Leon, great post!
I agree with you that MBA isn’t required to startup a new business, and as you rightly point out, what matters at the start is a single amazing concept and executing on it - not over analysis or too much management theory or planning. Once the initial concept is there no doubt the business skills become useful in expansion.
In my case, as a first time entrepreneur starting up a company there were many times where material learnt in business school or MBA would have come in handy - during fund raising especially (convertible debt and valuations are topics tought in my electrical engineering degree).
However in the age of Amazon, Wikis, forums and the net in general, you can always find lots of useful reference material and teach yourself, and much of the material can be summarised and learnt pretty quickly. And the key is - learning and using the knowledge when you need it, rather than learning a whole lot of things, most of which may have either forgotten or are not relevant to you later once you’re starting the business. Once the business starts scaling and money is available then people with those skills can be brought in, but at the start I think not as important.
As for the business vs technical founder, I think you need one of the founders to be technical and able to turn idea into reality. In my case, my founding partner and CTO provided the hardcore coding and 3D skills, and we wouldn’t have got to where we are now unless we started with that foundation - it would just be in idea. And although I don’t code my technical background (at least at a high level) helps me understand the issues and limitations when designing features…
But at the end of the day, I think the burning desire to build something and make it a reality is the most important personal attribute, no matter the background!
Steven Mak
July 7th, 2008 at 4:20 am
This is an interesting topic. Having completed an MBA with Entrepreneurship focus, there are a lot to discuss:
1) Do we need an MBA degree to operate a startup?
I think one can learn almost everything by reading books or thru the Internet, especially those with no experiments required. I read about someone operating a non-profit vet hospital for wildlife animals… who learned the veterinary knowledge on his own! So this doens’t seem to be a specific question on MBA. I bet that guy doesn’t have an MBA degree to learn how to operate that vet hospital too.
From time to time I heard about people saying one can learn by reading and practicing (not just startup)… especially went into debates on certain courses are good or valuable…. I believe the question of “certain courses needed for doing something” is a wrong question. Professions like lawyers, doctors all require practices before they can be accredited. Courses themselves never seem to be a sufficient condition for doing something successfully.
Looking at fish-ball stand owners, they probably don’t have MBA degree. But they know pretty well about raw material, i.e. fish-ball, supply, how to attract customers…..
Fish-ball stand owners probably don’t need undergraduate degree too, so why MBA?
2) What’s an MBA useful for? Why not replaced by reading books?
a) Commitment, I have to say some people are more committed when they took classes. I also understand that this is not a good reason
b) Assessment, assessment of your knowledge to certain level, and not mis-interpreting the subject matter.
c) Fixed Curriculum, you can always read what you like to read. But now you are forced to read something useful while you might not like it
d) Discussion, you have chances to discuss with people of similar interests, not to mention the teacher who give guidance when you are struck with something
e) Projects, games, and visits, I think this is something that differentiate an MBA programme with other postgraduate business programmes. The school I studied offered an intensive entrepreneurial project. Although it is something far from actually starting a startup, I believe this is also the closest one can get without putting big amount of money, time, and idea. The teacher also have good experiences with startup too.
Although an MBA degree never seem to be sufficient or even necessary condition to run a startup, I do believe an MBA provides a better understanding on what business is, and maybe better what running a startup is from a b-school focused on entrepreneurship.
3) Is it better to be a “business guy” or a “technical guy” as a founder?
What I heard most is that a “technical guy” shouldn’t be a founder. I met quite some good hackers but don’t seem good at knowing the market. Hackers are hard to find. It takes talent and years of learning to be a good hacker. But if they are able to turn their mindset to be more market-oriented, it makes a very good entrepreneur.
From the entrepreneurial project, one interesting thing is that ideas all come from their technology transfer company. Despite the B-school provides good training on entrepreneurship, one still needs good ideas to succeed. And MBA has never meant to replace this. This makes one big misunderstanding from many people criticising the value of MBA education.
Do you need an MBA to start a successful startup? - Stepcase Lifehack
July 7th, 2008 at 9:30 am
[...] Do you need an MBA to start a successful startup? - [Stepcase Blog] [...]
Marc Rohde
July 7th, 2008 at 10:08 am
I think that the bottom line of success is to realize your strengths and exploite them and to relize your weakness and look for appropriate support to strength them.
If you are technical with no business sense find people when can strengthen your weakness.
What I really learned as I studied for my MBA was how to resarch the right solution to a problem. Sure I can probably recall more about economic theory than I care to but in the end I didn’t *really learn* about international trade and import/export regulations until I started working at a mequila.
Do you need an MBA? No, you just need to recognize where you are weak and be willing to ask for help.
Yavvsy
July 7th, 2008 at 11:16 am
Very interesting post.
Myself, I did an MBA while running a small, entrepreneurial business. I found the MBA helped a lot for the reasons you’ve mentioned. However, the most important aspect was the discussions of failures and people’s experiences.
One example was my excellent sales prof. His stories and answers to questions were just better than reading 10 sales books. He could vary the material he presented to our needs and interests. Furthermore, all 30 of us in the class were tuned in to the same case studies and material. That always led to interesting conversations and observations that chould not be covered in a textbook.
If one had an “Entrepreneurial Reading Group” that could really take place of the MBA. But reading solo is just not as effective. I’ve looked at the Portable MBA site, and that comes close to what the MBA did give me, but frankly, reason #1: commitment was the winner for me. Signing up for a course while working in a business pinned me down to do at least 20 hours of work a week on the learning. Without the coursework structure, I just wouldn’t have been able to find (make?) that much time.
Do you need an MBA to run a startup? Of course not, but it does help tremendously.
Mathew Sweezey
July 7th, 2008 at 11:18 am
I agree they are different should be treated as different goals and not connected. Starting a business and school are two different mind sets. Look at all of the top CEO’s who have started their business. You will find a large mix of both MBA’s and non-degree folks.
School gives you information, starting your own business requires skills and knowledge your not taught in school. I dont have an MBA but I have started my own company. Mechanixloop.com is my first start up, however I do plan on one day getting an MBA because of my belief in continuing your education.
I think if you are serious about business you should get an MBA if it will teach you things you can not learn in the work place. I think if you are wanting to chart new waters in a new industry an MBA wont teach you things you need to know. Just get some good mentors and jump in and you’ll learn what you need to know when you need to know it and have a product in the process.
LordBuddha
July 7th, 2008 at 6:31 pm
I actually just read somewhere that a tech guy is the worst guy to start a business because a tech person’s mind is too structured. In a startup, a person must be open minded and willing to take bold move without being blogged down by analysis.
goodwill
July 8th, 2008 at 9:35 am
Haha I love this post. I can indeed prove it with my life experience. I have been working in one of the industry with a full group of MBA starting a company. The good thing of getting so many MBAs are it tends to be easier for you to get funding. But you hit the spot- the only really essential skill is you know what you are doing, more than how you manage a company without the true vision. MBAs could be successful, but they can’t avoid knowing the business they intended to do by experiencing it, which further proves your judgment.