Startups: does an MBA help?

I started three geeky software companies in Silicon Valley.  As co-founder of the first, I was working all day while getting an MBA at U.C. Berkeley at night.  My second and third were done post-MBA.  Based on my experience, having an MBA from a good university (as is true with almost any degree from a good university) definitely helps when it comes to raising capital, attracting talent, and growing the business, even from infancy to “young adulthood.”

First, a better formal education helps with credibility when fund-raising, especially if it’s the first time you are doing trying to raise money.  Take a look at the backgrounds of most of the partners and associates at the VC firms you are pitching.  There seem to be just two patterns:  an entrepreneur or executive that has done something significant OR (predominantly) someone with a good undergrad degree, some work at a technical company, and an MBA from a top 20 B-school.  Like it or not, having an educational or professional background that is similar to the backgrounds of the people giving you money breaks through the initial credibility barriers.

Secondly, having an education that is not strictly technical is a huge plus when it comes to actually taking an initial, often, technical idea and painting the first broad strokes that make that idea into a profit-making business.  Understanding how companies (vs. technologies) operate, being exposed to broadly applicable disciplines such as Organizational Behavior and Business Law make those first moments at the helm of your new venture feel a lot less daunting.  Having read a few cases (Harvard or otherwise) gives you a perspective that while the market and technologies you are chasing are completely new, the cycles and processes of making a business grow are decades, if not centuries, old.  Notice, I said nothing about “contacts” — never found that aspect of Business School to be all it’s trumped up to be… maybe I should have done Wharton and not Haas.

Is an MBA a requirement?  Absolutely not.  There are plenty of business savvy people that have arrived where they are without a formal education in business.  You don’t need it, but it’s a good thing to have.

However, don’t be fooled.  While having a business degree is big plus, the thought that you can start, lead, and build a technical company without a technical degree of some sort (or at least a close partner who does) is ludicrous.  In New York City, where I now live, I meet start-up founders with a familiar educational pattern — Econ undergrad, Wall Street, MBA who are hoping to start a new, usually internet-based business.  Naive.  Your business acumen will be negated by your inability to innovate technically and attract the right technical talent (at least in the software business).  You won’t hire smart technical people because, chances are, you have never met one and don’t know how to tell the real from the bullshit.  **You can not outsource Version 1.0.  And don’t listen to anyone who tells you that you can.

Worse is a VC with the same (Econ/Wall Street/MBA) background.  Remember, Venture Capital should be your last job, not your first.  It that’s what you have, do late-stage investments and stay out of seed + early…  you are not prepared to evaluate the technical risks.

So, my advice to the technical founders:  either get a business degree (after you’ve had your first professional successes in technology) or get a co-founder that has a business degree.

Vice versa, for the non-technical founders… don’t even think about starting a business in technology without having a strong, presentable, technically savvy co-founder by your side.  Don’t even think about it.  YES, the market and the idea are what matters most, but you are doomed if you think that technical innovation and execution can be outsourced or “hired later.”

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